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The United States Can Reduce Huawei's Trade Restrictions to Assist Existing Customers By Reuters

© Reuters. PHOTOGALLERY: A woman sees her phone while walking near the Huawei store in Beijing

From Karen Friedfeld

(Reuters) – The Commerce Department in the United States announced on Friday that it may soon reduce the restrictions on Huawei Technologies on the blacklist this week would make it almost impossible for the Chinese company to service its existing customers.

The Commerce Department, which effectively cut Huawei's ability to buy parts and components made by American products, is considering issuing a temporary general license to "prevent the interruption of existing network operations and equipment," the spokeswoman said.

Potential licensees, for example, could include Internet access and mobile phone service providers in sparsely populated areas such as Wyoming and eastern Oregon, which in recent years have purchased networking equipment from Huawei.

In fact, the Commerce Department will allow Huawei to buy goods in the United States to help existing customers retain the reliability of networks and equipment, but the Chinese firm will still not be allowed to buy US parts and production components of new products.

Emphasizing a potential rule suggests that changes in the Huawei's supply chain may have immediate, far-reaching, and unintended consequences.

The blacklist, officially known as setting up Huawei on an entity listing of the business unit, was one or two efforts by the Trump administration this week, allegedly made in an effort to thwart national security risks. In executive order, President Donald Trump also effectively banned the use of his equipment in US telecommunications networks.

The United States believes that Huawei's smartphones and network equipment can be used by China to spy on the Americans, the allegations that the company has repeatedly denied.

The latest move to trade comes after China made a more aggressive tone in its trade war with the United States, suggesting that resuming talks between the two largest economies in the world would be meaningless if Washington did not change the course.

A spokesman for Huawei, the world's largest telecommunications equipment manufacturer, did not immediately respond to the request for comment.

Of the $ 70 billion, Huawei spent on buying components in 2018, about $ 11 billion went to American firms, including Qualcomm (NASDAQ :), Intel Corp. (NASDAQ 🙂 and Micron Technology Inc. (NASDAQ :). If the Commerce Department issues a license, suppliers in the United States will have to have separate permits for running a new business with Huawei, which would be extremely difficult to obtain, the spokeswoman said.

The provisional general license will last 90 days, she said and will be published in the Federal Register, just as the rule adds Huawei to the entity list, will be announced in government's release on Tuesday.

"The goal is to prevent collateral damage to non-Huawei entities that use their equipment," said a lawyer from Washington, Kevin Wolfe, a former Trade Department official.

The list of entities bans Huawei and 68 branches in 26 countries to buy goods and technology manufactured from America without licenses that are likely to be rejected.

The Entity List identifies companies that are believed to be involved in activities that are contrary to national security or the interests of US foreign policy.

In a final rule that was announced on Thursday, the government linked the Huawei list to a crime against the company in Brooklyn, New York.

US prosecutors rejected the indictment in January, accusing the company of engaging in fraud in the bank to receive US embargo goods and services in Iran and to transfer money from the country through the international banking system.

The chief executive of Huawei Meng Wangzhou, the company's founder's daughter, was detained in Canada in December in connection with the indictment, a move that led to a three-way diplomatic crisis involving the United States, China and Canada.

Meng, who was released on bail, remains in Vancouver and fights extradition. She maintains her innocence, and Huawei has entered into a plea for innocence in New York.

Trump injected other considerations in the criminal case after Meng's arrest when he told Reuters he would intervene if he helped close the trade deal.

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