Don’t be Caught Off Guard: Huawei Entities Added to US Entity List

Effective 16 May 2019, exports and reexports by non-US parties are included within the scope of the Entity List restrictions imposed by the US Government against Chinese company Huawei and its non-US subsidiaries. 

By Susan Kovarovics| Bryan Cave Leighton Paisner LLP, May 21, 2019

The Trump Administration announced last week that the US Government has added Huawei to the Commerce Department Entity List.  Here is a link to a copy of the Federal Register Notice pursuant to which that designation occurred.  This notice was formally published 21 May 2019, but the Commerce Department has noted that it became effective when a public inspection copy was published on the Federal Register site at 4:15 pm (presumably Eastern Daylight Time) on 16 May 2019.  It covers Huawei Technologies Co., Ltd. (“Huawei”) and 68 of its non-US affiliates. 

The restrictions associated with this Entity List designation impact all exports, reexports or in-country transfers of items (goods, technology or software) subject to the US Export Administration Regulations (“EAR”) to any of the Huawei entities named in the Federal Register Notice.  Keep in mind that items received from the United States or that are US origin continue to be subject to the EAR unless and until they have been incorporated into an item made outside the United States that contains only de minimis US content controlled to the country to which the item destined.  Items made outside the United States that do contain greater than de minimis controlled US content are themselves considered to be subject to the EAR and, thus, within the scope of this Entity List restriction. 

Be cognizant of aftermarket activities and software and technology transfers that may also trigger these EAR restrictions. 

The Commerce Department has issued a temporary general license effective 20 May 2019 to 19 August 2019 that authorizes the export, reexport or transfer in accordance with the license requirements and exceptions applicable as of 16 May 2019 for items destined to Huawei or one of its 68 affiliates subject to the Entity List designation if such items are for one of the four approved end uses:

  • Continued operation of existing networks and equipment
  • Support to existing handsets
  • Cybersecurity research and vulnerability disclosure
  • Engagement as necessary for development of 5G standards by a duly recognized standards body

Use of the temporary general license is predicated on creation of a certification in advance of the export identifying how the transaction meets the criteria for the temporary general license.  The certification must be maintained as part of the export records for the transaction in accordance with the EAR’s recordkeeping requirements. 

For all other exports, reexports, or transfers to Huawei and its affiliates, specific licenses can be sought.  However, there is a presumption of denial, so the case must be made to explain why any particular proposed transaction does not run contrary to the national security and foreign policy reasons behind the designations in the first instance. 

Susan Kovarovics

Susan Kovarovics

Susan Kovarovics is a partner in the International Trade group of Bryan Cave Leighton Paisner LLP. She counsels foreign and domestic parties regarding international business regulatory matters. Specifically, her practice focuses on providing practical legal advice that can be readily applied by in-house legal and business personnel in matters involving the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), sanctions administered by the Office of Foreign Assets Control (OFAC), U.S. anti-boycott laws, and the Foreign Corrupt Practices Act (FCPA).

Ms. Kovarovics designs and implements compliance programs and provides training sessions on export and defense trade controls, trade sanctions, customs, anti-corruption and anti-boycott matters. She also designs and leads internal audits and reviews to assess compliance in these areas.

Ms. Kovarovics assists clients with all aspects of the export license and agreement approvals processes at the Department of Commerce, State and Treasury. In addition, she guides clients through commodity jurisdictions and commodity classification requests for exports and ruling requests related to import matters. She also conducts due diligence reviews related to export controls, trade sanctions and anti-corruption matters.

Routinely, Ms. Kovarovics conducts internal investigations and advises clients on future actions based on results of investigations, including appropriate disciplinary and other corrective measures in response to violations of corporate policies and trade regulations. Moreover, she counsels clients on voluntary disclosure matters and represents clients in enforcement proceedings before federal authorities.

Susan’s Bar Admissions include the states of Virginia and the District of Columbia in the U.S.

Education: Susan earned her law degree from Georgetown University, cum laude (1996) and her undergraduate degree from Drew University, summa cum laude (1993).

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