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Huawei loophole discovered which is hard to close

by on21 May 2020

Turns out that Huawei could get its paws on chips after all

US regulators hoping to punish Huawei for being a successful Chinese operation have discovered that their moves to stop companies supplying the company with chips have a big loophole.

The new rule, unveiled by the Commerce Department last week, expands the US authorities to require licences for sales to Huawei of semiconductors made abroad with US technology, amplifying the department’s reach to halt exports to the world’s No. 2 smartphone maker.

But the rule only includes chips designed by Huawei and does not cover shipments if they are sent directly to Huawei’s customers.

State Department official Christopher Ashley Ford said the rule itself would provide regulators with the insight to determine if it should be altered.

The rule will “give us a great deal more information upon which to base export control decisions as we move forward and try to find the right answer to these challenges including by adapting, if we need to, if Huawei tries to work around our rules in some way”. 

He added that regulators would watch and “certainly make any changes that we think are necessary”.

Hawks in the Trump administration are miffed that the rules are not doing enough to cut off Huawei’s access to supplies in a its crackdown effort.

An industry lawyer who declined to be named said one way to change the rule would be to tweak the language to capture chips sold “to the benefit of” Huawei, but noted such a change would pose its own challenges.

Speaking as part of the same briefing with Ford, Cordell Hull, a Commerce Department official, said the agency’s enforcement arm “will be looking at efforts to circumvent the rules".

Last modified on 21 May 2020
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