Exclusive: The US can reduce Huawei trade restrictions to help existing customers

(Corrects title in 17th of this May 17, to say "CFO" Meng Wanzhou, not "CEO".)

FILE PHOTO: A woman looks at the phone as she walks past a Huawei shop in Beijing, China May 1[ads1]6, 2019. REUTERS / Thomas Peter / Filfoto

By Karen Freifeld

(Reuters) – The US Commerce Department said on Friday that it could soon limit restrictions on Huawei Technologies after this week's blacklisting would have made it almost impossible for the Chinese company to serve its existing customers.

The Department of Commerce, which effectively stopped Huawei's ability to buy US-made parts and components, is considering issuing a temporary general license to "prevent interruptions to existing network operations and equipment," a spokeswoman said.

For example, the potential beneficiaries of the license may include Internet access and mobile carriers in densely populated places such as Wyoming and Eastern Oregon who purchased Huawei's networking equipment in recent years.

In reality, the trading department will allow Huawei to buy US goods so that it can help existing customers maintain the reliability of networks and equipment, but the Chinese firm would still not buy US parts and components to produce new products.

The potential regulatory scroll suggests that changes in the Huawei supply chain may have immediate, far-reaching and unintended consequences.

Blacklisting, officially known as placing Huawei on the Commerce Department Entity List, was one or two efforts of the Trump administration this week, allegedly made in an attempt to counter national security risks. In an executive order, President Donald Trump has also effectively hindered the use of his equipment in US telecommunications networks.

The United States believes that Huawei's smartphones and networking equipment can be used by China to spy on Americans, claiming that the company has repeatedly refused.

The latest trade move comes as China has beaten a more aggressive tone in its trade war with the United States. Suggesting conversations between the world's two largest economies would be meaningless unless Washington changed its course.

A spokesman for Huawei, the world's largest producer of telecommunications equipment, did not immediately respond to a request for comment.

Huawei spent over $ 70 billion to buy components in 2018, and about $ 11 billion went to US firms, including Qualcomm, Intel Corp. and Micron Technology Inc. If the trading department issues the license, US vendors would still have separate licenses to driving new business with Huawei, which would be extremely difficult to achieve, spokeswoman said.

The temporary general license will last for 90 days, she said, and will be posted in the Federal Register, just as the rule that adds Huawei to the entity list will be published in the government's publication Tuesday.

"The goal is to prevent security damage on non-Huawei devices that use their equipment," said Washington's lawyer, Kevin Wolf, a former Trade Department official.

Business listing prohibits Huawei and 68 subsidiaries in 26 countries from buying US-made goods and technology without licenses that are likely to be denied.

The entity list identifies companies that are believed to be involved in activities that violate US national security or foreign policy interests.

In a final rule published on Thursday, the government bound Huawei's unit listing to a criminal case awaiting the company in Brooklyn, New York.

U.S .. prosecutors unsealed accused in January accusing the company of engaging in bank scams to get embargoed US goods and services in Iran and to move money out of the country via the international banking system.

Huawei's Chief Financial Officer Meng Wanzhou, daughter of the company's founder, was arrested in Canada in December for charges, a move that has led to a three-way diplomatic crisis with the United States, China, and Canada.

Meng, who was released on citizen, remains in Vancouver and fights extradition. She has maintained her innocence, and Huawei has come in for a plea if not guilty of New York.

Trump injected other considerations into the criminal case after Meng was arrested when he told Reuters that he would intervene if it helped close a trade deal.

Reporting by Karen Freifeld; Editing by Leslie Adler, Grant McCool, Chris Sanders and Diane Craft

Our Standards: Thomson Reuters Trust Principles.

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