Expanded export restrictions on Huawei have been implemented by the US, also enlarging the scope of the Entity List.
The United States Department of Commerce's Bureau of Industry and Security (BIS) has published a final rule that strengthens existing restrictions on exports of items to Huawei Technologies Co., Ltd. and its affiliates. This move is aimed at impeding Huawei's access to critical US-origin technology, including hardware, software, and chip manufacturing capabilities.
The new rule, effective from August 17, 2020, expands upon the Entity List restrictions that were initially imposed on Huawei and its 68 affiliates in May 2019. Since then, the Foreign Direct Product Rule (FDPR) was expanded in 2020 to prohibit exports of cutting-edge semiconductors and related products from third countries to Huawei and its affiliates if such items are produced using US technology or software.
The expanded restrictions now apply to any item that will be incorporated into, or will be used in the production or development of, any item produced, purchased, or ordered by any Huawei entity on the Entity List. This effectively stops major global manufacturers, including Korean and Taiwanese firms, from supplying advanced chips to Huawei.
The new rule also extends the Entity List restrictions to cover transactions involving entities on the List, regardless of their role in the transaction, including as purchasers, intermediate consignees, ultimate consignees, or end-users.
Moreover, manufacturers of semiconductors will need to apply for and obtain a license to sell chips that are intended to be used in any way by Huawei, even if those chips were not derived from Huawei's own designs. The license applications for selling chips to Huawei will be subject to a general policy of denial, except for transactions involving foreign-produced items that are capable of supporting the development or production of telecom systems, equipment, and devices at only below the 5G level (e.g., 4G, 3G, etc.), which will be subject to a case-by-case review.
The final rule also acknowledges the expiration of the Temporary General License (TGL) for Huawei but permanently allows certain limited transactions related to Huawei to continue. The permanent authorization is limited to information regarding security vulnerabilities in Huawei items needed for ongoing cybersecurity research to protect existing third-party networks.
In addition, BIS has added 38 non-US affiliates of Huawei to the Entity List, bringing the total number of Huawei entities on the List to over 150. The new rule also expands the Entity List to cover additional parties and activities deemed contrary to US national security interests.
The scope of these new restrictions is expected to be extremely broad due to the critical role of US software and technology in semiconductor manufacturing. There are only a few toolmakers for semiconductor production, and many of them have a US nexus, making products manufactured using their tools subject to the new restrictions.
The new rules also clarify that using chips like Huawei's Ascend line violates US export controls, and the US is conditioning access to AI computing resources on security restrictions to limit Huawei's AI infrastructure development abroad. The final rule further restricts high-performance computing, AI, and advanced semiconductor capabilities that might enhance Huawei's military or hypersonic weapons development.
These measures are part of Executive Order 13873 and are designed to protect US national security interests by limiting Huawei's access to critical technologies. The rules apply not only directly to Huawei but also to its foreign subsidiaries or third-country firms that use US technology in their production processes.
The final rule, effective from August 17, 2020, targets Huawei's access to critical US-origin technology, including hardware, software, and chip manufacturing capabilities. The expanded restrictions now apply to any item that will be incorporated into, or will be used in the production or development of, any item produced by Huawei, which effectively stops major global manufacturers from supplying advanced chips to Huawei due to the crucial role of US technology in semiconductor manufacturing.
