U.S. Commerce Department Revises Export Controls on Huawei, Permits Some Sharing of Export Controlled Technology in Setting Standards for 5G and Other Technology

On June 15, 2020, the U.S. Department of Commerce revised its existing export controls on Chinese telecoms company Huawei to permit limited sharing of some export-controlled technology with Huawei in the context of international efforts to establish technical standards for 5G and other new technologies. The Federal Register notice containing this interim final rule is expected to be published on June 18, 2020 and will take effect upon publication.

Background

Last year, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) added Huawei and Huawei affiliates to the BIS “Entity List.” As a result, companies and individuals (wherever located) were prohibited from providing any goods, software or technology that are subject to the U.S. Export Administration Regulations (EAR) to Huawei without a license. Among other things, these restrictions prohibited the release and sharing of U.S.-developed technology with Huawei in the context of international standards-setting bodies, such as those currently at work to develop internationally accepted technical standards for fifth generation (5G) wireless telecommunications.

Initially, BIS issued a Temporary General License that authorized certain limited sharing of information with Huawei in certain standards-setting bodies. However, BIS later amended the Temporary General License to remove this authorization. As a result, many companies with U.S. technology stopped participating in international standards projects with Huawei. Some standards organizations also made plans to move their operations outside of the United States or prohibit or restrict U.S. participation in order to continue their activities with Huawei outside of the scope of the Entity List restrictions.

As these plans took shape, many companies and industry groups became concerned that they would be left behind when it came to setting new technical standards for 5G, artificial intelligence and many other developing technologies. Policymakers also became increasingly worried that U.S. leadership would be eroded as standards bodies increasingly moved to make their work “EAR-free.”

Limited Activities With Huawei Involving Standards Organizations, Certain Non-Sensitive Consumer-Oriented Technologies Now Permitted

The latest rule change is intended to address these concerns and to clarify U.S. export control policy regarding Huawei. The new rule authorizes the release of certain technology to Huawei and its affiliates on the Entity List without a license if such release is made for the purpose of contributing to the revision or development of a “standard” in a “standards organization.” The terms “Standard” and “standards organization” have been defined in the Federal Register notice implementing this interim final rule.

The specific technology that is authorized for release under the new rule is limited to “technology” as defined by the EAR that is classified as EAR99 or is controlled solely for Anti-Terrorism (AT) reasons on the Commerce Control List. Technology that is controlled for other reasons — such as national security (NS) reasons (as set forth on the Commerce Control List) is not eligible. Moreover, the release of covered technology must be for the purpose of contributing to the revision or development of a standard in a standards organization.

Reengagement With Huawei in International Standards Development on a Limited Scale Now Permitted

Because Huawei has been a core member of many multi-stakeholder international bodies to set 5G standards, such as a prominent telecommunications consortium — the 3rd Generation Partnership Project (3GPP), U.S. companies’ ability to access and contribute to Huawei’s proposals continue to carry significant weight in the standards-writing community, despite escalating geopolitical tensions. For example, Communications Daily recently reported that Brookings Institution observed that “about half of the standards that China has proposed have been adopted by the [United Nations] as the global standard” for emerging technologies such as 5G and facial recognition. The main concern was that with continued U.S. restrictions on U.S. companies from participating in bodies to which Huawei is a member, the U.S. may lag further behind.

Given the critical need to participate in standard setting for 5G technology and the Federal Communications Commission’s 5G FAST Plan for U.S. service providers and vendors to play a large role in maintaining U.S. leadership in wireless technology, the rule change is likely to be welcome news in those sectors.

Should you have any questions about this interim final rule, Huawei’s listing, or any of the additional tightening of restrictions on exports, re-exports, and transfers to China, please do not hesitate to contact the authors or your regular Faegre Drinker Biddle & Reath LLP contact.