On Wednesday, May 15, 2019, the Department of Commerce, Bureau of Industry and Security (BIS) announced the addition of Huawei Technologies Co. Ltd., a Chinese telecommunications and electronics manufacturing giant, to the Entity List. A Federal Register Notice (84 FR 22961) followed on Tuesday, May 21, 2019.
What is the Entity List?
The Entity List is one of many U.S. Government lists that restricts business dealings with individuals, companies, and other entities worldwide.
As described by BIS:
Additions to the Entity List are decided by the End-User Review Committee which is comprised of officials from the Department of Commerce, Department of Defense, State Department, and Department of Energy. Under § 744.11(b) of the Export Administration Regulations, persons or organizations for whom there is reasonable cause to believe that they are involved, were involved, or pose a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such persons, may be added to the Entity List.
Why was Huawei Listed?
Huawei’s listing was based on BIS’s conclusion that “Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest” and includes 68 non-US affiliates in 26 countries (Belgium, Bolivia, Brazil, Burma, Canada, Chile, China, Egypt, Germany, Hong Kong, Jamaica, Japan, Jordan, Lebanon, Madagascar, Netherlands, Oman, Pakistan, Paraguay, Qatar, Singapore, Sri Lanka, Switzerland, Taiwan, United Kingdom, and Vietnam).
What does the Listing Establish?
The listing creates a license requirement with a presumption of denial for items subject to the EAR (including EAR99 or other items that would otherwise be shipped No License Required, or NLR).
The listing was followed by the announcement of a temporary General License that creates a limited 90-day reprieve from May 20, 2019 to August 19, 2019. During this time, some transactions are authorized when relating to supporting existing networks, supporting existing handsets, and cybersecurity research and vulnerability disclosure, and 5G standards development.
The General License and any subsequent publications should be reviewed closely for their applicability to any transaction. Use of the General License also requires a certification statement.
Best Practice – Screen Your Customers and Suppliers
The Entity List as well as other government lists are continuously updated. To ensure compliance, all parties should be screened regularly, using software such as ECS’s own ECScreening.