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March 17, 2020 / Law Alert

BIS extending temporary license to Huawei for the fifth time

On Feb. 18, 2020, the Department of Commerce Bureau of Industry and Security (BIS) issued the Final Rule Temporary General License: Extension of Validity, granting a 45-day extension through April 1, 2020, authorizing certain exports for Huawei Technologies Co. Ltd. and 114 of its non-U.S. affiliates (jointly as “Huawei”) on the entity list. On March 10, 2020, the BIS further extended the temporary general license to Huawei until May 1, 2020. Those extensions came after the Department of Justice announced new criminal charges against Huawei on Feb. 13, 2020, and after the introduction of Bill 3316 in the Senate, which would require a license for re-exports to companies on the entity list, including Huawei.

The BIS extended the temporary general license to Huawei for the first time on May 22, 2019, for the second time on Aug. 21, 2019, and for the third time on Nov. 20, 2019. The BIS states that the extensions are necessary to allow existing telecommunications providers, particularly those in rural U.S. communities, to continue to temporarily and securely operate existing networks while they identify future operational alternatives.

The temporary general license announced authorizes “certain activities necessary for the continued operations of existing networks and equipment as well as the support of existing mobile services, including cybersecurity research critical to maintaining the integrity and reliability of existing and fully operational networks and equipment.”

Exporters, re-exporters and transferors that qualify for the temporary general license are required to maintain certifications and other records regarding use that must be made available to BIS upon request. In addition, any exports, re-exports or in-country transfers of items subject to the Export Control Regulations to these entities that are not explicitly authorized by the temporary general licenses continue to require a separate license for that item, but it is understood that such license application will be reviewed under a presumption of denial and will be hard to obtain.

Companies should carefully evaluate and continue to monitor their customer, vendor and other third-party data against the list of Huawei affiliates to identify any potential ongoing or pending transactions with these parties and set up appropriate controls to ensure compliance with U.S. export control laws. Given Huawei’s supply chain in the U.S., such screening may not be easy and may be very costly. Companies should be aware that violations can result in significant financial penalties, denial of export privileges and reputational damage.

The BIS is now seeking public comments until March 25, 2020 on whether it should further extend temporary general license for companies doing business with Huawei and whether other changes should be made to the temporary general license practice. Companies impacted should file comments to support the extension prior to March 25 so they can potentially obtain more time to evaluate supply chains and find alternative suppliers.

For more information please contact Yuanyou (Sunny) Yang or any member of Porter Wright’s International Business & Trade Practice Group.