US Export Controls on Huawei Apply to Certain Foreign Products, Sheppard Mullin Says

Foreign manufacturers need to be aware that their products may be covered by the Commerce Department's Bureau of Industry and Security's listing of telecommunications equipment manufacturer Huawei on the Entity List, even if they aren't manufactured in the U.S., according to an alert by law firm Sheppard Mullin. U.S. export controls on Huawei and its affiliates may apply to a substantial scope of foreign goods that contain more than 25 percent U.S.-origin content. Under the BIS de minimis rule, products are subject to the Export Administration Regulations -- and consequently new license requirements for Huawei -- if more than one-fourth of the product is composed of U.S.-origin content that is also controlled under the EAR, except for “EAR99 items” or products that do not require a license, the alert said.

Non-U.S. manufacturers should reassess their products to make sure the value of U.S.-origin content does not near 25 percent, the report said. If it does, the alert said, “those companies would be well advised to carefully account and record the U.S.-origin value in that product. It is likely that BIS will be looking carefully for U.S. items and technology being reexported to the newly designated entities.” BIS issued a general license temporarily allowing certain transactions with Huawei in a May 22 Federal Register notice (see 1905200063). The alert noted that BIS has not yet clarified how the de minimis rule intersects with its Entity List, but said that BIS and the Office of Export Enforcement have considered regulations to prevent companies from “exploiting the de minimis to ‘laundering’ U.S.-origin input items in non-U.S. end-products.”