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Restrictions on Trade with Mainland Chinese Telecom Firm Implemented

As expected, the U.S. Department of Commerce’s Bureau of Industry and Security has issued a final rule that formally adds Huawei Technologies Co. Ltd. and 68 of its non-U.S. affiliates to the Entity List, which contains the names of foreign parties that are subject to specific licencing requirements for the export, re-export and/or in-country transfer of controlled items. The affiliates are located in mainland China (35), Hong Kong (6), the United Kingdom (3), Vietnam (2), and Belgium, Bolivia, Brazil, Burma, Canada, Chile, Egypt, Germany, Jamaica, Japan, Jordan, Lebanon, Madagascar, the Netherlands, Oman, Pakistan, Paraguay, Qatar, Singapore, Sri Lanka, Switzerland and Taiwan with one each. This action will enter into force on 21 May.

For all of the entities added to the Entity List, BIS will impose a licence requirement for all items subject to the Export Administration Regulations as well as a licence review policy of presumption of denial. Additionally, no licence exemptions will be available for exports, re-exports or transfers (in-country) to the persons being added to the Entity List, except in the case of covered shipments that were en route aboard a carrier to a port of export or re-export on 17 May pursuant to actual orders for export or re-export to a foreign destination.

According to BIS, the U.S. government has determined that there is reasonable cause to believe that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States. To illustrate, Huawei has been indicted in the U.S. District Court for the Eastern District of New York on 13 counts of violating U.S. law, including violations of the International Emergency Economic Powers Act, by knowingly and wilfully causing the export, re-export, sale and supply, directly and indirectly, of goods, technology and services (banking and other financial services) from the United States to Iran and the government of Iran without obtaining a licence from the U.S. Department of Treasury’s Office of Foreign Assets Control.

BIS further contends that Huawei’s affiliates present a significant risk of acting on Huawei’s behalf to engage in such activities. Without the imposition of a licence requirement as to these affiliated companies, BIS adds, there is reasonable cause to believe that Huawei would seek to use these entities to evade the restrictions imposed by its addition to the Entity List.

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