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New Bill Would Tighten Restrictions on Huawei

Sen. Tom Cotton (Republican-Arkansas) and Rep. Mike Gallagher (Republican-Wisconsin) on 12 March introduced legislation aimed primarily at tightening restrictions on Huawei. The so-called NETWORKS Act would add foreign companies producing 5G technology to the U.S. Treasury Department's Specially Designated Nationals (SDN) List should they engage in economic or industrial espionage or sanctions violations. The legislation does not apply to imported goods or to transactions involving existing 3G or 4G networks, and allows for a 90-day presidential waiver if essential to national security.

According to a press release issued by Sen. Cotton’s office, placing a company on the SDN List “effectively freezes them from accessing the U.S. financial system and is one of the most effective tools the Treasury Department has to combat national security threats.” Although no firm is specifically named in the legislation, bill supporters singled out Huawei in press releases, arguing that the bill would cut Huawei out of the U.S. financial system and “level the playing field for U.S. companies by limiting the ability of any company, American or foreign, to transact with Huawei.”

An eventual SDN designation would make life particularly difficult for Huawei in the United States. The company is currently on the Bureau of Industry and Security Entity List but continuing extensions of a temporary general licence authorising certain exports to Huawei and its affiliates have lessened the impact of that designation. The NETWORKS Act would go into effect 30 days from enactment, if passed by both chambers of Congress and signed by the president.

In other news, credible press reports indicate that ZTE, which pleaded guilty three years ago to violating U.S. sanctions against Iran and North Korea, is the subject of a new investigation. The U.S. Foreign Corrupt Practices Act punishes firms who offer bribes in foreign countries, so it will be interesting to see whether ZTE is charged for this separate offence.

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