Department of Commerce amends direct product rule to restrict Huawei’s use of US technology and software.

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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.

If you have questions how the changes may impact your company, contact export compliance attorney David Hsu by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com, dh@gjatradelaw.com.

Potential changes to the Foreign Direct Product Rule may hinder Huawei supply chain.

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The Trump administration has agreed to changes to the Foreign Direct Product Rule, which subjects some foreign-made goods based on U.S. technology or software to comply with U.S. regulations.  The proposed rule change requires foreign companies that use U.S. chip making equipment to obtain a license before they can supply certain semiconductor chips to Huawei.

The proposed rule change is to limit the number of foreign suppliers who continue to supply chips to Huawei. The new rule will greatly impact Huawei as most chip manufacturers use equipment produc Multiple articles on this subject cite the Taiwan-based “Taiwan Semiconductor Manufacturing Company” (TSMC). TSMC is Taiwan’s largest semiconductor manufacturer with over 15 fabs located throughout Taiwan.

If you have any questions whether you are subject to export controls or if you want to know how you are impacted, contact experienced export controls attorney David Hsu by phone/text at 832-896-6288 or by email at attorney.dave@yahoo.com, dh@gjatradelaw.com.