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New U.S. Trade Sanctions Target Mainland Chinese Telecom Giant

New restrictions on exports to mainland Chinese telecom giant Huawei Technologies Co. Ltd. and 70 affiliates will be effective soon and other trade involving information and communications technology and services could be limited as well after President Trump issued on 15 May an executive order declaring a national emergency due to the threat of foreign adversaries using ICT for economic and industrial espionage.

The EO authorises the U.S. Department of Commerce to prohibit imports and other transactions that involve information and communications technology (or services) designed, developed, manufactured or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary and (i) pose an undue risk of sabotage to or subversion of ICT in the United States; (ii) pose an undue risk of catastrophic effects on the security or resiliency of U.S. critical infrastructure or the digital economy of the United States; or (iii) otherwise pose an unacceptable risk to U.S. national security. Foreign adversaries are defined as any foreign government or non-government entity engaged in a long-term pattern or serious instances of conduct significantly adverse to U.S. national security.

Following the release of the EO, the DOC’s Bureau of Industry and Security confirmed that Huawei and its 70 affiliates are a key target of the new sanctions authorisation and will be added to the Entity List. While the precise prohibitions that will be imposed on exports to these entities as a result are unclear pending issuance of an official notice in the Federal Register, it is likely that most if not all transactions subject to U.S. jurisdiction will require a licence from BIS.

According to BIS, this action stems from information available to the DOC that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the U.S. Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act, conspiracy to violate the IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.

More Entity List additions will likely follow in the coming weeks and months to promote the administration’s goal of securing the U.S. information and communications technology and services supply chain, including hardware, software and other products for information processing, storage, retrieval or communication by electronic means. Violations of Entity List and other restrictions can result in significant financial penalties, denial of export privileges and reputational damage.

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