The Bureau of Industry and Security has extended the temporary general license authorizing certain transactions with Huawei Technologies Co., Ltd. and numerous of its affiliates. That’s the good news, such as it is. The bad news is that 46 more Huawei affiliates were added to the Entity List, on top of the 68, plus Huawei itself, named in the original designation. It’s a decidedly mixed bag.
We’ve already covered the initial designation, so I’ll address the noteworthy changes and clarifications in the extension.
First, the temporary license’s expiration was extended another ninety (90) days, from August 19, 2019 to November 18, 2019.
Second, BIS clarified that the scope of the “continued operation of existing networks and equipment” authorization is limited. It excludes transactions involving “end devices such as general-purpose computing devices that would not be considered to be part of an existing and ‘fully operational network.’” The temporary license also “does not authorize support for equipment that is not directly related to the support and maintenance of the network” or items “for general business purposes.” Therefore, equipment and supplies used for administrative support of a Huawei facility, for example, are generally outside the temporary license’s coverage.
Third, the initial temporary license stated that the “continued operation” provision applies to existing “contracts and agreements executed between Huawei and third parties or the sixty-eight non-U.S. Huawei affiliates and third parties on or before May 16, 2019.” The new one explains that “a ‘third party’ is intended to be a party such as a telecommunication service provider, and does not include or refer to any of the Huawei listed entities or exporter, reexporter, or transferor.” This means that intra-Huawei arrangements are excluded.
Fourth, the extended temporary license explains that its software updates authorization encompasses “bug fixes, security vulnerability patches, and other updates to existing versions of the software necessary to maintain and support existing and currently ‘fully operational networks’ and equipment” but not “enhance[ments to] the functional capacities of the original software or equipment.”
Finally, the new version makes changes to the certification requirement. As before, the exporter, reexporter or transferor must obtain a compliance certification, with detailed information concerning the Huawei entity involved, identity of the articles and other mandatory fields. The certification now must be issued by the acquiring Huawei entity.
BIS also has issued FAQs that explain the prohibitions on Huawei and the activities permitted by the temporary license. I was awaiting their issuance before posting this article. The guidance they give is pretty straightforward, so I won’t recap it, but one FAQ particularly caught my eye:
3) Does de minimis apply to the Huawei Entity List Rule?
Unless authorized by the TGL or the savings clause in the Huawei Entity List Rules, a license is required to export, reexport, or transfer (in-country) any item subject to the EAR to Huawei or any of its listed affiliates. Items not subject to the EAR are not subject to the Entity List’s requirements.
I get the same question, and variations of it, a lot. The BIS response is accurate, but unsatisfactorily incomplete.
The criteria for determining when an item is subject to the EAR are found in Part 734 of the regulations. I particularly commend 15 C.F.R. §§ 734.3 and 734.4 to your attention. You should keep in mind that the de minimis rule applies to U.S.-origin content that is used in third-country production of another article and is controlled to that country. Whether such an analysis is applicable will require a case-by-case and country-by-country evaluation; there is no across-the-board answer as to whether a product with U.S.-origin content is “subject to the EAR” and hence within the scope of the Huawei prohibition.