The State and Commerce departments clarified Thursday they're abiding by a March court order that blocked the transfer of 3D printing software from the U.S. munitions list to the commerce control list. Exporters “must continue to treat such technical data and software as subject to control on the USML,” State said in the Federal Register. Commerce said all such requests should go to State.
The Commerce Department extended comments on future temporary general license extensions under export administration regulations by about a month to April 22, says Thursday's Federal Register. The feedback will determine “continuing need” and scope for future extensions for the temporary general license for Huawei, the department said Wednesday. Thursday, Reuters reported senior administration officials agreed to new measures to further restrict foreign exports of chips to Huawei. It's unclear if President Donald Trump will OK the change. The White House and Commerce Department's Bureau of Industry and Security didn't comment.
Senate Commerce Committee Chairman Roger Wicker, R-Miss., told reporters Thursday he reached a deal to allow the chamber to pass the Secure and Trusted Communications Networks Act (HR-4998) by unanimous consent (UC) after the upcoming Presidents Day recess. The House-passed bill would allocate at least $1 billion to help U.S. communications providers remove from their networks Chinese equipment determined to threaten national security. Meanwhile, Huawei faces 16 DOJ charges it violated the Racketeer Influenced and Corrupt Organizations Act and stole trade secrets from six U.S. companies (see 2002130030).
The Commerce Department doesn’t have a timeline for releasing its next set of controls on emerging technologies and its advance NPRM for foundational technologies, despite expectations from top officials both would be published before 2020 (see 1912110040), a Bureau of Industry and Security official said Tuesday. “I would have thought that they would be out earlier,” said Hillary Hess, director of BIS’ regulatory policy division, at a Sensors and Instrumentation Technical Advisory Committee meeting. “I think everybody would like to see them come out, but I’m not sure how long it’s going to take. I’m having trouble getting a bead on it myself.” Interagency working groups are reviewing the proposed emerging technology controls, which include potential restrictions on exports of artificial intelligence and robotics items, Hess said. Although BIS published a January interim final rule that placed export controls on geospatial imagery software, that rule stemmed from existing export administration regulations process in place since 2012, Hess said. “None of [the working group] rules have been published yet.” Hess said the ANPRM for foundational technologies is in internal review.
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.
Expanding export administration regulation limits to further control foreign shipments to Huawei would have a “dramatic” impact on international supply chains, said Kevin Wolf, a trade lawyer with Akin Gump. The actions, which the Commerce Department is considering (see 1912110039), include expanding the direct product rule and broadening the de minimis rule. “This is a really, really big deal,” said Wolf Friday in Boston on a Massachusetts Export Center panel. “The collateral, psychological effect of this, I fear, is really going to be quite dramatic.” The changes could apply to foreign-made items that contain U.S.-origin content not controlled for national security reasons. They wouldn't apply to dual-use goods and sensitive technologies, just consumer goods, Wolf said. The rule may apply to “wholly formed made items that no other country controls, creating a jurisdictional rule for foreign companies” when selling to Huawei that would likely be difficult to comply with, he said. The rule would make dealing with foreign-made U.S. content and technology “very frustrating and difficult for foreign companies,” Wolf said, which may have a ripple effect.
The State Department removed certain “lower performing radars” from the U.S. munitions list, effective Friday, said that day's Federal Register. The radars are used in self-driving cars and in “detect and avoid systems for autonomous aerial systems,” it said. The radars and radar components will now be subject to the export administration regulations.
The Commerce Department’s Bureau of Industry and Security tried to answer questions from stakeholders about standards organizations' activities that involve Huawei and about its BIS entity listing. It calls for licenses for any activities involving “the exchange, transfer, or other disclosure of technology or software that is of U.S.-origin or is otherwise subject to the” export administration regulations, BIS said Tuesday. Examples include: “participating in a non-public working or study group involving the exchange ... of such technology,” “participating in electronic exchanges within a standards body, by email or other means, that contain or attach such technology or software” and “releasing or otherwise providing access to blueprints, flowcharts, schematics, prototypes, or similar materials that contain such technology.” U.S. carriers using Huawei got more time this week to adjust to restrictions pushed by President Donald Trump involving the company (see 1908190040).
With President Donald Trump’s announcement that U.S. companies will be allowed to sell to Huawei (see 1907010070 or 1907010015), it remains unclear how and if the Commerce Department will amend its May notice that added Huawei to the agency’s entity list and banned all exports of items subject to the export administration regulations with a review policy of presumption of denial. “That does not appear to be decided yet,” said William Reinsch of the Center for Strategic and International Studies and Commerce’s former undersecretary for export administration. Reinsch expects Commerce to keep its “presumption of denial” policy “but manage it by adding and subtracting to the” temporary general license. The temporary general license will likely be extended past the original 90-days and be expanded to cover more items, Reinsch said. “The debate will be about what items will be covered,” Reinsch emailed. “Everything else will be subject to a presumption of denial, which means you can apply but don’t hold your breath waiting for a ‘yes.’” Alternatively, Commerce could change its review policy to a case-by-case basis, Reinsch said, noting it’s more likely the agency simply expands its temporary general license. “I think it’s easier for them administratively,” Reinsch said. “If they change it, it would require another” Federal Register notice. Semiconductor Industry Association President John Neuffer called the announcement “good news for the semiconductor industry, the overall tech sector, and the world’s two largest economies.” Commerce plans to grant export licenses for products that China can easily get from other countries, including “various chips and software,” said National Economic Council Director Larry Kudlow Sunday on CBS and Fox News. “Anything to do with national security concerns will not receive a new license from the Commerce Department,” Kudlow said on CBS. A U.S.-China Business Council spokesperson said the specifics of the announcement were unclear but the move likely will provide relief for U.S. exporters. The net effect and next steps in Congress are difficult to predict (see 1907020060).
The net effect of U.S. concessions on Huawei is murky, much like U.S. trade policy at present, experts said in interviews this week. President Donald Trump and Chinese President Xi Jinping agreed at the G20 conference in Osaka, Japan, to delay discussion of such U.S. sanctions “until the end” of trade talks (see 1907010070). Such penalties were seen as one of the best U.S. bargaining chips with China (see 1905240038). It’s unclear whether Congress will be able to channel into action bipartisan outcry over President Donald Trump’s move to ease federal restrictions on the Chinese telecom equipment manufacturer, experts said.