Commerce, Defense Departments May Reach 'Compromise' Rule on Huawei Restrictions

Although the Defense Department reportedly objected to a proposed Commerce Department rule that would have further restricted foreign sales to Huawei that contain U.S. goods (see 2001240012), the administration will continue considering other ways to increase controls on shipments to Huawei, which may include a “compromise” rule, according to a Jan. 31 research report from Raymond James & Associates. Political support for the proposed rule, including by three senators in a January letter (see 2001270026), may “convince” the Defense Department to “ease its opposition in some form.” If the agency concedes, it will still likely push back on other restrictions on China's technology industry “to preserve some of the revenue stream to the U.S. industrial base,” the report said.

Industry stakeholders should carefully monitor the Feb. 16 expiration date for the most recent temporary general license extension Commerce granted Huawei (see 1911180036), which could “signal the near to medium-term trajectory of enhanced controls on Huawei,” the report said.

Industry should also keep in mind that any further restrictions on Huawei could threaten the stability of the U.S.-China relationship brought on by the phase one trade deal (see 2001150073), the report said. In the deal, the U.S. promised to “facilitate the availability of goods and services to be purchased and imported into China,” which may contradict Commerce action to restrict exports to Huawei. “In short, this will remain a careful balancing act,” the report said, “and may limit the impact of potential restrictions if President Trump favors preserving progress made in the China trade talks over the potential benefits of restricting Huawei's access to U.S. products.”