Huawei bans the repercussions on the global supply chain



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WASHINGTON – The US decision to put Huawei Technologies on an export blacklist has pushed companies around the world to scramble to respond to the latest salvo against China's largest telecommunications provider.

When the US Department of Commerce announced on Wednesday the addition of Huawei to the list of foreign companies posing risks to national security, law firms sent urgent warnings to corporate customers, saying the restrictions would come into effect on next day.

Huawei and 68 subsidiaries have been placed on the list of entities, which requires suppliers to obtain permission from the Commerce Department before sending components to the named companies. Such requests are generally refused.

Commerce restrictions include sensitive technologies with potential military applications, such as semiconductors. But the latest Huawei embargo applies to all products. The restrictions also apply to products manufactured outside the United States, although they may generally be provided without Commerce authorization if the percentage of parts and software derived from that country does not exceed 25%. market value.

Yet, determining whether individual components are exempt from the export ban is a daunting task even with known formulas. The only way to confirm a waiver is to go directly to the commerce department, according to some lawyers.

Many companies seem to be willing to cut ties with Huawei to avoid suffering sanctions from US authorities. An executive of a US semiconductor manufacturer confirmed to Nikkei that the company had no choice but to stop supplying Huawei, saying the result is unfortunate both on the US and Chinese side.

However, "if the delivery contracts are not fulfilled, this could give rise to claims for compensation for damages," said Kazuhiro Yanagida, a company lawyer. Can the trade war between the United States and China exempt a party from the performance of a contract, it is unclear.

In response to these concerns, the Commerce Department plans to issue 90-day general licenses granting waivers for certain transactions, Reuters reported on Friday. These exemptions would apply, for example, to the components used by Huawei for the maintenance of existing telecommunication equipment. Temporary licenses would not apply to any new businesses with US suppliers.

ZTE, China's second largest telecommunications manufacturer, was listed as an entity in 2016 for violating trade sanctions imposed on Iran. He was allowed to buy from some US suppliers about two weeks later. These interim accommodations were made after ZTE offered to cooperate with investigations, said Kevin Wolf, the former deputy secretary of Commerce who oversaw the case at the time.

Although ZTE remained on the blacklist until March 2017, the company was able to minimize the damage to its business. Wolf raises the possibility that Huawei is negotiating a modified sanction given the fact that the Trump administration enforces the export ban in conjunction with the lawsuits filed by the Department of Justice against the company .

The direction of the trade war between the United States and China remains the joker in this dynamic. Trade Secretary Wilbur Ross said Thursday that the case against Huawei was a separate case of ongoing trade negotiations. "This is not something that has been discussed in any of the many meetings that have taken place between China and the United States," Ross said.

However, US President Donald Trump said he could act on behalf of Huawei's chief financial officer, Meng Wanzhou, who was arrested in Canada, if he thought it would be good for the trade deal. "I would certainly intervene if I thought it was necessary," he said in December. The restrictions on Huawei could change according to Trump 's vagaries, which adds an extra layer of uncertainty to the global supply chain.

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