The Trump Administration announced last week that the US Government has added Huawei to the Commerce Department Entity List and, as of May 20, 2019, has announced a temporary general license for certain transactions. Here is a link to a copy of the Federal Register Notice pursuant to which that designation occurred. This notice was formally published May 21, 2019, but the Commerce Department has noted that it became effective when a public inspection copy was published on the Federal Register site at 4:15 pm (presumably Eastern Daylight Time) on May 16, 2019. The designation covers Huawei Technologies Co., Ltd. (“Huawei”) and 68 of its non-US affiliates.
The restrictions associated with this Entity List designation impact all exports, reexports or in-country transfers of items (goods, technology or software) subject to the US Export Administration Regulations (“EAR”) to any of the Huawei entities named in the Federal Register Notice. Hence, this impacts not just exporters from the United States, but also any party outside the United States—even if such party has no affiliation with a US party—to the extent the party outside the United States reexports or transfers items subject to the EAR.
Keep in mind that items received by third parties outside the United States from the United States or that are US origin continue to be subject to the EAR unless and until they have been incorporated into an item made outside the United States that contains only de minimis US content controlled to the country to which the item is destined. Items made outside the United States that do contain greater than de minimis controlled US content are themselves considered to be subject to the EAR and, thus, within the scope of this Entity List restriction.
Be cognizant of aftermarket activities and software and technology transfers that may also trigger these EAR restrictions.
Following the designation of Huawei and its affiliates, the Commerce Department issued a temporary general license, which may be accessed at this link. The temporary general license is not a panacea allowing all activities with Huawei to resume without any licensing. First, the general license is only temporary, having taken effect May 20, 2019, and expiring 90 days from then. Commerce will need to affirmatively take action to extend the general license for any activities after August 19, 2019. Second, only certain exports, reexports and transfers are authorized under the temporary general license. The temporary general license authorizes transactions destined to Huawei or one of its 68 affiliates subject to the Entity List designation if such items are for one of the four approved end uses:
Third, the temporary general license does not make all covered transactions eligible for export, reexport or transfer without export authorization. Rather, the temporary general license enables a party to continue with a transaction based on the export status in effect prior to the Entity List designation on May 16, 2019 (i.e., if something was eligible then for export “no license required” (“NLR”), it may now proceed NLR; if an item pre-May 16 required use of the ENC license exception, then that license exception would again be available for use and would need to be cited). Moreover, the presumption of denial would not apply for items requiring a license if the transaction is covered by the temporary general license, though a specific license would also still be needed.
Use of the temporary general license is predicated on creation of a certification in advance of the export identifying how the transaction meets the criteria for the temporary general license. The certification must be maintained as part of the export records for the transaction in accordance with the EAR’s recordkeeping requirements.
For all other exports, reexports, or transfers to Huawei and its affiliates, specific licenses can be sought. However, there is a presumption of denial, so the case must be made to explain why any particular proposed transaction does not run contrary to the national security and foreign policy reasons behind the designations in the first instance.