Effective August 19, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) (i) added forty-six (46) additional non-US affiliates of Chinese-headquartered Huawei Technologies Co. Ltd. (“Huawei”) to the Entity List, and (ii) extended and modified the Temporary General License (“TGL”) authorizing certain transactions involving the export, reexport, and transfer of items subject to the Export Administration Regulations (“EAR”) to Huawei and its designated non-US affiliates. The extended and modified TGL (“New TGL”) covers the Huawei entities added to the Entity List on May 16, 2019, as well as the ones added on August 19, 2019. The New TGL will be effective through November 18, 2019. As further discussed below, the New TGL (i) mitigates the impact of the Entity List designation by waiving the Entity List restrictions for certain transactions, and (ii) imposes strenuous certification requirements for the use of the New TGL. Please see our blog post on the initial designation of Huawei and its non-US affiliates here and the original TGL here.
The US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued an interim final rule effective June 21, 2019 amending the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501 (the “RPPR Rule”), to add new requirements for reporting blocked or unblocked property and rejected transactions. The new reporting requirements apply to any US person (or person subject to US jurisdiction). Importantly, the rejected transaction reporting requirements, which previously applied to funds transfers rejected by financial institutions, now apply in the context of potentially any business transaction. This change could have significant implications for some companies in terms of compliance responsibilities and the need for related internal controls. The RPPR Rule does not provide much detail on the circumstances that would trigger the new reporting requirements in the context of the enumerated categories of transactions.
OFAC also added certain informational requirements for reports to clarify upfront the details needed to fully identify blocked or unblocked property and rejected transactions, and determine the authority under which they were blocked/unblocked/rejected. In announcing the RPPR Rule, OFAC indicated that in the past, these clarifications could sometimes require multiple time-consuming communications between OFAC and the submitter.
The US Government has taken coordinated actions this week that target Huawei Technologies Co. Ltd (“Huawei”), effectively cutting it off from sourcing US products and technology and likely barring its products from being used in US communications infrastructure and networks. The US export/reexport restrictions targeting Huawei took effect immediately on May 16, 2019. The expected prohibition on the use of Huawei products in US communications infrastructure is likely to take several months to implement.
The Trump Administration and Congress are tightening investment restrictions and export controls to address technology transfer concerns. These measures initially focus on China, but will have broader effects on investments in the United States and transfers of emerging technologies.