The Bureau of Industry and Security has begun a broad review of new export controls on surveillance technologies going to China, which may also include additions to the agency’s entity list, said acting Commerce Department Undersecretary for Industry and Security Cordell Hull. Hull called the review “comprehensive” and “in-depth,” saying it could lead to controls over advanced surveillance tools, artificial intelligence software and biometric technologies. The effort included a business advisory for companies with supply chains in China’s Xinjiang region and a request for industry feedback on the impact of controls on facial recognition software and other surveillance technology (see 2007170024). “We have put the business community on notice,” Hull told Wednesday's U.S. Commission on International Religious Freedom hearing. Hull said BIS is pleased with the impact of its export control regime, saying the restrictions hurt China’s ability to source sensitive U.S technologies. “We believe it's working. We believe our entity listings have impacted millions of dollars of items going to these entities,” Hull said. China's embassy in Washington didn't comment Thursday.
The Commerce Department said it's easing U.S. industry participation in telecom standards development even amid the administration's crackdown on Huawei. The department said a Bureau of Industry and Security rule says technology that wouldn't have needed a license to be disclosed to the Chinese company before its placement on the entity list "can be disclosed for the purpose of standards development in a standards development body without need for an export license." It noted U.S. work on standards setting "influences the future of 5G, autonomous vehicles, artificial intelligence" and other new tech. The general advisory opinion posted by BIS Aug. 19 is no longer in effect, Commerce said Monday. “Confusion stemming from the May 2019 entity list update had inadvertently sidelined U.S. companies from some technical standards conversations," said Information Technology Industry Council Senior Director-Policy, Asia Naomi Wilson. "We hope this measure will provide much-needed clarification and allow companies to once again compete and lead in these foundational activities that help enable the rollout of advanced technologies." Huawei didn't immediately comment.
China promised countermeasures to respond to increased U.S. restrictions against Huawei, slamming “abuse of export controls” and violation of international trade laws. License requirements on shipments to Huawei for foreign-made chips containing U.S. content (see 2005180018) are a “serious threat” to China’s chip industry, China’s Commerce Ministry said Sunday, per an unofficial translation. State media said China is considering placing U.S. companies on its unreliable entity list. The rule will “complicate” operations for communication equipment manufacturers and could lead to drops in revenue and R&D efforts, emailed a U.S.-China Business Council spokesperson. “More transactions will require export licenses, adding additional expense and delays with no guarantee that licenses will be granted.” Chinese companies “of course would very much like to ... indigenize all aspects of the supply chain,” said Keith Krach, State Department undersecretary-economic growth, to reporters last week. “But at least for the moment … U.S. companies still have a very significant comparative advantage when it comes to the largely software-facilitated design tools that are involved in producing the very best chips.” National Foreign Trade Council Vice President Richard Sawaya said the rule falls short of industry’s worst fears, and members “realize that national security-related technology controls are warranted.” He said industry would have appreciated more transparency as the rules were being considered and a comment period. “That’s really what industry is asking for,” Sawaya told us: “Due process.” Monday, Huawei criticized the increased restrictions, saying they “ignore the concerns of many companies and industry associations.” It said the rule will “undermine” the global semiconductor industry. “The U.S. is leveraging its own technological strengths to crush companies outside its own borders,” the company said. Huawei’s rotating chairman, Guo Ping, said he's “confident” the company will work around the curbs. “Our experience over the past year has made us confident that we can find a solution, that our customers and suppliers can continue to stand with us and minimize the impact of this discriminatory rule,” he said. Sen. Ben Sasse, R-Neb., called the rule “long overdue.” The U.S. “needs to strangle Huawei,” Sasse said. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs.”
Senate Armed Services Committee Chairman Jim Inhofe of Oklahoma and five other Senate Republicans urged the departments of Commerce, Defense, Energy and State Tuesday to “issue regulations as soon as possible confirming that U.S. participation in 5G standards-setting is not restricted by export control regulations” to ensure U.S. technology “continues to form the core of 5G foundational technology.” U.S. tech leaders “have been constrained from full participation in 5G standards-setting bodies” since Commerce's Bureau of Industry and Security’s addition of Chinese equipment maker Huawei to its entity list (see 1906190054), the senators wrote Energy Secretary Dan Brouillette, Defense Secretary Mark Esper, Secretary of State Mike Pompeo and Commerce Secretary of Wilbur Ross. “We are deeply concerned about the risks to the U.S. global leadership position” in 5G “as a result of this reduced participation, and the economic and national security implications of any diminished U.S. role in 5G.” When U.S. export controls “restrict U.S. companies from participating in standards-setting bodies,” Huawei “is well positioned to fill any gaps,” the senators said. The other GOP senators signing the letter were: John Cornyn of Texas, Tom Cotton of Arkansas, Mike Crapo of Idaho, Marco Rubio of Florida and Todd Young of Indiana.
Discussions within the Commerce Department to expand U.S. export control jurisdiction over foreign exports to Huawei would have a chilling effect on the U.S. semiconductor industry, said Semiconductor Industry Association President John Neuffer. Current U.S. export restrictions on Huawei are already hurting the industry’s ability to sell to China, said Neuffer during an Information and Technology Innovation Foundation workshop Tuesday. China is about 35 percent of U.S. semiconductor sales, and more restrictions would further alienate Chinese customers who are weary of being added to Commerce’s Entity List, he said: “Some of them are afraid they’re next.” Neuffer said the semiconductor industry remains uncertain about the U.S. approach toward Huawei and China. He warned the Trump administration against further revisions to the U.S. export control system. “We think that’s not necessary,” Neuffer said, adding the U.S. shouldn’t place controls on nonsensitive products with no national security nexus, such as smartphone chips. “There have been some confused waters for us in terms of understanding exactly what the U.S. government intends on doing with Huawei and the China market generally,” Neuffer said.
The Commerce Department should establish a bright-line process similar to the export administration regulations’ entity list for identifying supply chain threats, USTelecom said in comments Friday. The Information Technology Industry Council recommended Commerce designate foreign adversaries threatening the supply chain with specific criteria. In response to President Donald Trump’s May executive order, Commerce proposed new procedures for reviewing transactions, including imports, that involve information and communications technology and services seen as potential national security threats (see 1911260044). Commerce's bright-line process should rely on Homeland Security Department “risk assessment and related tools to draw lines between prohibited and permitted transactions,” USTelecom said. The association asked Commerce to coordinate its transaction evaluations with other agencies at “every step.” ITI called for a narrow scope for what transactions will trigger security reviews and a waiver process. It urged avoiding duplicative transaction reviews with export administration regulations, international traffic in arms regulations and the Committee on Foreign Investment in the U.S. Commerce's proposed rules are “overly-broad and highly subjective,” BSA|The Software Alliance said Friday. The proposed procedures would let Commerce “launch a review of virtually any ‘transaction’ involving almost any form of commercial technology, regardless of whether it has a clear nexus to national security or to a foreign adversary,” BSA wrote, saying it would create much industry uncertainty. The EO directs Commerce to issue regulations barring technology from foreign companies -- like Huawei and ZTE -- from U.S. networks.
The Senate voted 86-8 Tuesday to pass the compromise FY National Defense Authorization Act. S-1790 includes language targeting Chinese telecom equipment manufacturers Huawei and ZTE. The House approved the measure last week 377-48 (see 1912120061). President Donald Trump tweeted last week he intends to sign. The conference version includes a modified text of House-side anti-Huawei language originally sought by Rep. Mike Gallagher, R-Wis., to modify conditions for the Commerce Department to lift Bureau of Industry and Security addition of Huawei to its entity list (see 1906190054). It includes Gallagher’s proposal to direct the president report to Congress on ZTE compliance with a 2018 agreement that lifted Commerce's ban on U.S. companies selling to ZTE (see 1807130048). The measure includes a Senate-cleared proposal from Intelligence Committee Chairman Richard Burr, R-N.C., and Vice Chairman Mark Warner, D-Va., for the director of national intelligence report on how much "global and regional adoption” of foreign-made 5G technology affects U.S. national security. The NDAA includes language from the Authenticating Local Emergencies and Real Threats (Alert) Act to give the federal government sole missile threat alert issuance authority (see 1802070052).
Senate Majority Leader Mitch McConnell, R-Ky., set a Monday cloture vote on the FY 2020 National Defense Authorization Act (S-1790), which includes language targeting Chinese telecom equipment manufacturers Huawei and ZTE. The House approved the measure Wednesday 377-48. The House and Senate Armed Services committees released the conference text earlier this week after months of work to blend (see 1907220053) the Senate and House-passed (HR-2500) measures. The conference NDAA includes a modified version of House-side anti-Huawei language originally sought by Rep. Mike Gallagher, R-Wis., that would modify conditions for the Commerce Department to lift the Bureau of Industry and Security’s addition of Huawei to its entity list (see 1906190054). It would require Huawei to prove it “sufficiently resolved or settled” supply chain security issues that led to its inclusion on the BIS entity list (see 1905160081). Commerce has since approved export licenses (see 1911210027) for U.S. companies to have their products included in Huawei's equipment. The bill also includes Gallagher’s proposal to direct the president to report to Congress on ZTE's compliance with a 2018 agreement that lifted Commerce's ban on U.S. companies selling telecom software and equipment to ZTE (see 1807130048). The measure includes a Senate-cleared proposal from Intelligence Committee Chairman Richard Burr, R-N.C., and Vice Chairman Mark Warner, D-Va., that would require the director of national intelligence report the extent “global and regional adoption” of foreign-made 5G technology affects U.S. national security. The study would look at how the nation's “strategy to reduce foreign influence and political pressure in international standard-setting bodies” could help mitigate the threat. The NDAA includes language from the Authenticating Local Emergencies and Real Threats (Alert) Act, which would give the federal government sole authority to issue missile threat alerts and preempt state and local governments' role (see 1802070052). Senate Communications Subcommittee ranking member Brian Schatz, D-Hawaii, filed the bill in response to the January 2018 false missile emergency alert in Hawaii (see 1801160054). NDAA conferees agreed to remove Senate-cleared language telling DOD to work with the FCC and NTIA to establish a spectrum sharing R&D program. House Commerce Committee ranking member Greg Walden, R-Ore., and others raised concerns about the language because they believe it could undermine NTIA’s role in making spectrum allocation decisions for the federal government (see 1909180048). The conference text also doesn’t include House-cleared language from the 911 Supporting Accurate Views of Emergency Services (Saves) Act. HR-1629/S-1015 would change the federal government's classification of public safety call-takers and dispatchers to "protective service occupations" (see 1904050054).
Fifteen senators asked the Commerce Department to reverse its decision to approve Huawei-related export licenses (see 1911210027) for U.S. companies to have their products included in the Chinese telecom maker's equipment. The senators, led by Minority Leader Chuck Schumer, D-N.Y., and Tom Cotton, R-Ark., wrote President Donald Trump Thursday they're “concerned that the approval of additional, more permanent licenses will allow Huawei to fully resume its engagement with certain U.S. firms without an adequate assessment of the risks to national security.” Though the legislators acknowledged license decisions will come under a review with presumption of denial, they fear several licenses will be granted after Commerce Secretary Wilbur Ross said the agency plans to grant “quite a few." Democratic presidential candidates Cory Booker, New Jersey, and Elizabeth Warren, Massachusetts, were among the signers. Commerce "is issuing these narrow licenses to authorize limited and specific activities which do not pose a significant risk to the national security or foreign policy interests of the U.S.," a spokesperson emailed Friday. "These applications were approved through an interagency license review process." Huawei and its affiliates remain on the department's entity list subjecting it to restrictions, the representative noted.
Commerce Department export restrictions forced chipmaker Xilinx to remove all remaining Huawei-related “revenue expectations” from its outlook for fiscal 2020 ending in March, said CEO Victor Peng on a fiscal Q2 call Wednesday. He cited "trade restrictions with Huawei and the uncertainty presented to our business." He hopes "agreement between the U.S. and Chinese governments is reached as soon as possible, so we can resume engaging in a manner consistent with an important customer.” Xilinx got about $50 million revenue from Huawei in the first half ended Sept. 28, the “vast majority in Q1 before the restrictions, he said. Q2 sales in the Xilinx Wired and Wireless Group in which the Huawei business resides were down 8 percent sequentially, said Peng. Xilinx gets about 8 percent of its total revenue from Huawei in a normal year, he said. Though Xilinx “expedited” license applications, it hasn’t landed approvals, he said. Commerce got 200-plus Huawei-related license requests since the Chinese company was added to the agency’s entity list (see 1910230029). Huawei and Commerce didn't comment Thursday. Xilinx determined in Q2 there were some “older products that we could legally continue to ship” to Huawei, said Peng. It turned out that revenue from those products was “essentially negligible,” he said. “After one quarter of seeing that and not seeing any additional license approvals, we have decided that it's just prudent to take all the risk out.”