An Attempt to Limit the Strain on the Telecom Sector, but Broad Prohibition on Exports Remains
The Department of Commerce Bureau of Industry and Security (BIS) has issued a 90-day temporary general license exempting a set of transactions from the Entity List designation of Huawei Technologies Co., Ltd. (“Huawei”) and its affiliates worldwide, which was effective May 16, 2019. The Entity List designation effectively prohibits the export, reexport, or transfer of hardware, software, and technology subject to the U.S. Export Administration Regulations (EAR) to Huawei and its affiliates, as explained in our earlier client alert. The temporary general license aims to mitigate the impact of the Entity List designation on the operations of U.S. and foreign telecommunications providers with Huawei hardware and software, but does not provide broad relief from Entity List prohibitions. The general license is effective from May 20, 2019, to August 19, 2019.
The general license allows the following transactions, subject to existing licensing requirements under the EAR:
1. Continued Operation of Existing Networks and Equipment: Transactions necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches, subject to legally binding contracts and agreements executed between Huawei and third parties on or before May 16, 2019.
2. Support to Existing Handsets: Transactions necessary to provide service and support, including software updates or patches, to existing Huawei handsets that were available to the public on or before May 16, 2019.
3. Cybersecurity Research and Vulnerability Disclosure: The disclosure to Huawei of information regarding security vulnerabilities in items owned, possessed, or controlled by Huawei when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently fully operational networks and equipment, as well as handsets.
4. Engagement as Necessary for Development of 5G Standards by a Duly Recognized Standards Body: Engagement with Huawei as necessary for the development of 5G standards as part of a duly recognized international standards body.
A company wishing to avail itself of these exemptions is required to create a certification statement specifying how the transaction meets the scope of the general license. The company need not submit the certification to BIS, but must retain the certification in its records.
Except for these specific activities, the effect of placing Huawei on the Entity List is unchanged. It is not clear whether BIS will approve additional general licenses. If BIS does not issue more general licenses or modify the existing general license, entities seeking to transfer EAR-covered items, technology, or software to Huawei outside the scope of the general license will need to apply for specific licenses authorizing such transactions. Applications for specific licenses will have to overcome a presumption of denial from BIS. We are closely monitoring this matter and will continue to provide updates and alerts as it develops.