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Home / Business / US firms Find legal ways around Trumps Huawei Blacklist

US firms Find legal ways around Trumps Huawei Blacklist



(Bloomberg) – US technology companies have resumed selling specific products to Huawei Technologies Co. after concluding that there are legal ways to work with the Chinese telecom girl despite being included on a Trump Administration blacklist.

On Tuesday, Micron Technology Inc., the largest American data memory layer manufacturer, said it had begun sending some components to Huawei after lawyers studied export restrictions. Intel Corp., the largest microprocessor manufacturer, has also started selling to Huawei again, according to a person familiar with the case. It is not clear how many other suppliers have come to the same conclusion.

The US Department of Commerce added Huawei last month to the so-called entity listing, a move designed to get the Chinese company to buy US components and software. The Trump administration said that Huawei is helping Beijing in espionage and represents a security risk – the company refuses. Trade officials and White Houses are frustrated that companies have resumed Huawei shipments, according to another person familiar with the case. The White House did not immediately respond to a request for comment.

Particulators use certain exceptions to the export restrictions. Even though the companies are headquartered in the United States, through the ownership of foreign subsidiaries and operations, they can classify their technology as foreign, according to analyst Steven Fox, Cross Research. For example, if less than 25% of the technology in a chip comes from the United States, it cannot be covered by the prohibition, in accordance with applicable rules.

"It took them weeks to figure it out," Fox said. "What they did was look at laws and rules and apply them to their business."

Shares in Asian chip makers from Tokyo Electron Ltd. to SK Hynix Inc. rose Wednesday after Micron had reported results before estimates. [19659007] Micron has operations around the world, some through acquisitions, and owns factories in Singapore, Japan and Taiwan. Intel has factories in China and Ireland and a large design center and manufacturing facility in Israel. The company refused to comment.

Businesses like Micron and Intel can legally continue some shipments to Huawei under what is called the de minimis rule, says Kevin Wolf, former head of the Trade Department's Export Control Section.

overseas from US origin technology is only subject to the device list prohibition if the technology and item are sensitive items controlled for "national security" reasons, "Wolf said." But an item produced abroad from less sensitive technology from the United States is not subject to list of prohibitions. "

The de minimis threshold is 25%, according to the trade department.

National security piles in the Trump administration believed that inclusion on the entity list would put pressure on Huawei, but they did not understand or misunderstood the existing rules People who were familiar with internal abuses said these counselors did not fully follow the limits of export controls in limiting supply chains that come deep into China

Micron's CEO Sanjay Mehrotra, in a conference call that discussed the company's earnings, refused to explain his analysis, despite repeated questions, in a short interview after the conversation, he would either did not elaborate and said he hoped the United States and China would quickly resolve their trade dispute.

The Semiconductor Industry Association Trade Group prepared a statement to support the right of its members to keep working with an important customer: "The SIAs are committed to strict compliance with US export control regulations. As we have discussed with the US Government, it is now clear that some items can be delivered to Huawei in accordance with the Entity List and applicable regulations. "

Commercial war and Huawei sanctions put tough US chip makers. They need to comply with new rules in their home country, while navigating the business in China, an increasingly important market. More than 60% of the $ 470 billion sold last year went through China.

If Huawei's US suppliers can resume any sale, it can avoid the negative economic consequences many have expected. Micron's stock increased as much as 11% in extended trading.

Although these companies have found ways to legally continue to export some of their products to Huawei, they are prohibited from offering after-sales support as software updates. , repairs or installation assistance. This means that while a product in a box can be shipped from Taiwan to China, the company cannot, for example, provide information about software updates or assistance from Silicon Valley. Wolf said that in his experience it can be a significant disability.

Finding legitimate ways to limit restrictions is taking on greater importance for US companies, as the Trump administration is expanding the use of technology exports to China. Last year, the Department of Commerce responded to five Chinese units accusing them of developing supercomputers for military applications. Bloomberg has also reported that some Chinese video surveillance companies may be barred from US vendors.

The Ministry of Commerce can easily change the definition of which foreign products are subject to the regulations. That change wouldn't require the congress's approval, Wolf said. Nevertheless, it is not clear whether the Trump administration is looking to make such changes.

"Micron will continue to comply with all state and legal requirements, just as we do in all our operations globally," said Micron CEO Mehrotra. "Of course, we can't predict if more government action can affect our ability to send to Huawei."

(Updates with Asian chipmaker's shares from the sixth paragraph.)

To contact journalists on this story: Ian King in San Francisco at ianking@bloomberg.net; Jenny Leonard in Washington at jleonard67@bloomberg.net

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Tom Giles

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