On September 9, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) published two Frequently Asked Question (“FAQ”) documents (available here and here) on the Huawei Entity List and Temporary General License (“TGL”) and the Huawei TGL Extension (the amended TGL issued on August 21, 2019 is available here). See our blog post on the extension of the Huawei TGL here.
The key clarifications made by BIS in the two sets of FAQs include the following:
- Huawei Entity List and TGL FAQs
- Application of Savings Clause to Designated Huawei Entities. BIS clarified that shipments of items subject to the Export Administration Regulations (“EAR”) that were already en route aboard a carrier to a port of export or reexport on the dates the relevant Huawei entities were designated on the Entity List (i.e., May 16, 2019 or August 19, 2019) are authorized, to the extent they were previously eligible for export or reexport to that destination under a License Exception or export or reexport without a license. In other words, shipments pursuant to actual orders placed prior to the relevant Huawei entity’s designation are “grandfathered” and not subject to the Entity List restrictions where the shipment was already in process at the time of the designation.
- Payments to and from Designated Huawei Entities. BIS confirmed that the listing of an entity on the Entity List does not impose limitations on payments between parties. The Entity List restrictions apply only to the export, reexport, or transfer of items to designated Huawei entities, but do not preclude the entry into contracts or other commercial dealings with those entities.
- Imports of Huawei Products into the United States. BIS further clarified that imports of Huawei goods into the United States, including return of items subject to the EAR by designated Huawei entities (e.g., for repair), are not prohibited. However, returning those items back to Huawei (e.g., after they are repaired) would require a BIS license, unless the items are covered by the TGL.
- Issuing License to Use Patents to Designated Huawei Entities. Although patents are not by themselves subject to the EAR, if the acquisition of a patent license, whether directly or indirectly, enables a designated Huawei entity to acquire an item subject to the EAR, BIS clarified in the FAQs that a license is necessary.
- Continued Operation of Existing Networks and Equipment. BIS issued guidance regarding the scope of the first authorization in the TGL, which authorizes, in relevant part, “engagement in transactions necessary to maintain and support existing and currently ‘fully operational networks’ and equipment, including software for bug fixes, security vulnerability patches, and other changes to existing versions of the software, subject to legally binding contracts and agreements executed between Huawei, or one of its listed non-U.S. affiliates, and ‘third parties’ on or before May 16, 2019.” BIS clarified that this authorization includes support to operators (e.g., debugging, configuration, and other activities to maintain services); emergency and planned software updates necessary to maintain network operability; in-life upgrades of equipment and components to maintain (but not expand) capacity; and in-life replacements of defective hardware. Activities or equipment that increase or enhance the functionality of the network beyond its current capabilities or end-of-life replacement are not within the scope of this authorization. BIS did not clarify, however, whether this authorization covers exports to designated Huawei entities for their own internal use, or whether it is limited to the provision of items subject to the EAR for use by third parties, who may be receiving equipment or services from Huawei designated entities related to the operation of existing networks and equipment.
- Huawei TGL Extension FAQs
- Services Covered by the Entity List Requirements. Although services are generally not subject to the EAR, BIS acknowledged that the telecommunications industry may use the term to refer to the export or transfer of software or technology. Because of this common usage, BIS clarified that in any transaction where a US-origin item is exported, reexported, or transferred to Huawei or its affiliates, including in the management of a telecommunications network, the transaction is subject to the EAR and requires a license unless the transaction qualifies for authorization under the savings clause or the TGL.
- Changes to paragraph (c)(1) of the TGL. BIS clarified that the authorization in paragraph (c)(1) of the TGL only extends to exports, reexports, and transfers that support currently existing and “fully operational networks” and equipment. The August 2019 revisions to the Huawei TGL clarified that end-devices, such as general purpose computing devices, are not part of “fully operational networks” and thus do not fall within the authorization’s scope. Equipment not directly related to a network’s support and maintenance (e.g., general purpose business equipment) is also excluded from the authorization’s scope.
- Changes to paragraph (c)(2) of the TGL. The FAQs also summarized the changes made by the August 2019 revisions to the Huawei TGL with respect to the provision of support to existing personal consumer electronic devices. Specifically, BIS clarified that “personal consumer electronic devices” under paragraph (c)(2) include personally-owned equipment such as phones, tablets, smart watches, televisions, and other devices. BIS clarified that paragraph (c)(2) of the Huawei TGL also authorizes “customer premises equipment” for export, reexport, or transfer to Huawei. The authorizations in paragraph (c)(2) are limited to personal consumer electronic devices and customer premises equipment that were publicly available on May 16, 2019.
- Removal of the authorization paragraph (c)(4) of the Huawei TGL. BIS explained that the authorization in paragraph (c)(4) of the TGL, which authorized engagement with designated Huawei affiliates for the development of 5G standards as part of a duly recognized international standards body, was removed based on BIS’ finding that previously existing EAR provisions sufficiently address the application of Entity List-based licensing requirements to activities in connection with standards development bodies.
- Clarification of Certification Requirements. The August 2019 revisions to the Huawei TGL continue to require the exporter, reexporter, or transferor to obtain a certification statement from the designated Huawei entity that will receive the items under the Huawei TGL, but such parties are no longer responsible for creating the certification statements. The FAQs clarify that a new certification statement is not required for each shipment made pursuant to the TGL; rather, one certification statement may be used for multiple exports, reexports, or transfers of the same items under the Huawei TGL, so long as the information provided is accurate for all shipments. Additionally, if multiple exports, reexports, or transfers are made against the same certification statement, a log or similar record must be maintained that identifies each item and the quantity thereof made against the certification statement.