Yesterday, May 15, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) announced plans to restrict Huawei’s use of U.S. technology and software to design and manufacture its semiconductors abroad by amending the foreign-produced direct product rule. This change to the rule was established to counter Huawei’s acquisition of semiconductors that are the direct product of certain software and technology from the US.
While BIS added Huawei and its affiliates to the Entity List in 2019 and therefore requiring US companies wishing to export items to Huawei required the companies to obtain a license. Despite being placed on the Entity List, Huawei continued to use software and technology from the US to design semiconductors, there by getting around the basis for placement on the Entity List. Specifically, Huawei would use semiconductor fabrication facilities overseas that incorporated U.S. equipment.
The rule changes specifically mention Huawei and are written to close the loophole. The full announcement and full text of the rule changes can be found at the Department of Commerce website here.