The U.S. government expects to soon publish a new rule that would expand its powers to block sales of foreign-made goods to Chinese vendor Huawei, Reuters reported, citing two sources with knowledge of the matter.
In May 2019, the U.S. Department of Commerce added Huawei to its Entity List, citing national security concerns. This decision effectively banned the company from buying parts and components from U.S. companies without U.S. government approval. Under the order, Huawei will need a U.S. government license to buy components from U.S. suppliers.
At that time, firms including Google, Intel, Qualcomm and Microm halted shipments due to the restrictions. Huawei relies heavily on computer chips imported from U.S. companies.
However, under current rules, key foreign supply chains remain beyond the reach of U.S. regulations. With the new move, Washington aims to expand the scope of the restrictions.
According to the report, U.S. businesses believe that a new effort to enable the government to regulate more sales to Huawei to include low-tech items made overseas with very little U.S. technology could end up negatively impacting U.S. companies while encouraging Huawei to source more goods abroad.
In November, Reuters had reported that the Commerce Department was considering broadening the De minimis Rule, which defines how much U.S. content in a foreign-made product gives the U.S. government authority to regulate an export.
Under current regulations, the U.S. government can require a license or block the export of many high-tech products shipped to China from other countries if U.S.-made components represent more than 25% of the total value of the good.
According to two people familiar with the matter, the Commerce Department has drafted a rule that would lower the threshold only on exports to Huawei to 10%.
The report also highlighted that this new regulation could be approved in a matter of weeks if other government agencies sign off on the measure.
The Commerce Department has also reportedly drafted a regulation that would expand the Foreign Direct Product Rule, which subjects foreign-made goods that are based on U.S. technology or software to U.S. oversight. This would be broadened to include low-tech items made abroad that are based on U.S. technology and shipped to Huawei, the people said.
Washington believes that the deployment of Huawei’s gear in 5G networks represents a threat for the national security as the government considers that the Chinese government could use Huawei’s equipment for spying purposes, something that has been repeatedly denied by the Chinese vendor.
The Trump administration has tried to convince Washington’s allies to ban the use of Huawei’s equipment in 5G network rollouts. Some countries including Australia, New Zealand and Japan have already excluded Huawei from 5G deployments.
