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American ShipperNewsTrade and Compliance

Republican senators seek answers on Huawei export controls

Lawmakers want the Defense Department to explain within 60 days why it rejected a Commerce Department proposal to tighten the U.S. content threshold for exports to the Chinese telecom.

Three Republican senators want answers from the Trump administration about why it has not moved forward with strengthening U.S. export controls related to Chinese telecom Huawei Technologies Co. Ltd.

Sens. Ben Sasse of Nebraska, Tom Cotton of Arkansas and Marco Rubio of Florida, all members of the Senate Select Committee on Intelligence, asked Defense Secretary Mark Esper in a recent letter about reports that the Defense Department objected to Commerce Department regulations that would have made it more difficult for U.S. companies to sell to Huawei.

Late last year, the Commerce Department proposed reducing the U.S.-made content or “de minimis” amount required for U.S. reexports to be licensed as a measure to further curtail Huawei’s access to U.S. semiconductor technology.

Currently, for exports to Huawei in China, a foreign-made product is not subject to the Export Administration Regulations (EAR) if it contains 25% or less U.S.-origin “controlled content,” a policy that has been in place in the U.S. for the past 30 years. The amount of U.S.-controlled content determines whether an export requires an export license from the Commerce Department.

The Commerce Department had proposed reducing the 25% U.S. content threshold, including technology and software, for triggering a license to 10%.

A separate regulatory change has been proposed that would effectively prohibit any foreign product made using U.S. technology (regardless of classification) from being exported to Huawei. Semiconductor industry associations raised concerns about that proposal at the time it was announced.

In late January, the Defense Department in a surprise move reportedly balked at the Commerce Department’s proposal, suggesting that the lowered content de minimis would have a detrimental impact on U.S. semiconductor manufacturers. The Commerce Department then withdrew the proposal.

The Republican senators, who referred to Huawei as “the Chinese Communist Party’s tech puppet,” want the Defense Department within the next 60 days to explain the reasoning behind its objection to the Commerce Department’s proposal.

“Huawei is an arm of the Chinese Communist Party and should be treated as such,” the senators told the defense secretary in their letter. “It is difficult to imagine that, at the height of the Cold War, the Department of Defense would condone American companies contracting with KGB subsidiaries because Moscow offered a discount. We are concerned that the Defense Department is not appropriately weighing the risks.”

According to Reuters, the White House on Feb. 28 is expected to hold a cabinet-level meeting to further discuss the Department Defense’s denial of the Commerce proposal regarding Huawei.

The Commerce Department added Huawei and 68 of its overseas affiliates and subsidies to the Entity List on May 16, 2019, citing national security concerns with the company’s technology and close ties to the Chinese government. An additional 46 Huawei overseas affiliates were added to the list on Aug. 19, 2019.

The Entity List imposes significant restrictions on U.S. goods and technology exports to Huawei and requires a U.S. company or organization to obtain an export license from the Commerce Department’s Bureau of Industry and Security.

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Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.
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