Huawei still on entity list, says US, and companies face uphill battle to trade with it

10 July 2019 | Alan Burkitt-Gray

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Huawei is staying on the US list of embargoed companies, but the government will give US companies limited approval to do business with the Chinese vendor.

Wilbur Ross (pictured), US Commerce Secretary, told a conference yesterday that there will be a “presumption of denial” when US companies apply for permission to trade with Huawei.

Ross and President Donald Trump put Huawei on the entity list – a catalogue of banned companies – in May but at the end of June Trump suddenly appeared to give way, when he was at the G20 conference in Osaka.

Sources in Huawei told Capacity at the time that they were confused. “We don’t know any more about any temporary licence than the industry knows,” we were told. Trump alluded to a bigger discussion about Huawei at the end of the US-China trade talks. “We don’t know what that means. I don’t think he knows himself what he means. Nobody is clear about what it means.” Huawei later said the ban would cost it $30 billion in annual revenue this year.

Turns out Huawei was right to be confused. Ross said yesterday at a conference run by his own Bureau of Industry and Security (BIS) on export controls and security that “Huawei itself remains on the entity list, and the announcement does not change the scope of items requiring licences from the Commerce Department, nor the presumption of denial”.

He said the Department of Commerce (DoC) “will issue licences where there is no threat to US national security”, adding: “Within those confines we will try to make sure that we don’t just transfer revenue from the US to foreign firms.”

A few days after Trump’s off-the-cuff announcement Huawei noted it was stepping up its efforts to make itself less reliant on US suppliers, focusing on sourcing hardware and software from Japan, South Korea and Taiwan as well as China itself. Ross’s announcement on Tuesday is hardly likely to change that.

Ross said the DoC is setting up an emerging technology technical advisory committee that will aim to make the US “globally competitive” in science, technology, engineering and manufacturing. When the committee is appointed members “will get to work immediately to help modernise our controls on important technologies”, said Ross.

He pointed to the case of ZTE, Huawei’s Chinese rival, which was placed on the entity list for smuggling US-originated hardware and software to Iran in violation of US export controls. ZTE nearly closed down but was taken off the entity list when it agreed to pay a $1.4 billion fine.

“Because of the department’s action, ZTE is the most monitored corporation in BIS history,” said Ross.

“Due to criminal and civil settlements, ZTE has a full-time [Department of] Commerce monitor and a full-time court monitor policing its affairs, in addition to record-breaking fines.”

As Huawei would point out it has not been charged with, still less admitted to, smuggling kit to Iran – though Iran does feature in charges the US is seeking to put to Huawei’s CFO, Meng Wanzhou, who is in Canada facing extradition to the US. Her next court appearance is in September.