When US President Donald Trump signed an executive order this week effectively blocking Chinese manufacturers like Huawei from selling their 5G networking equipment in the US, he might have struck a blow against US tech companies as well.
Lawrence Ward, a partner at the international law firm Dorsey & Whitney, comments: “In sanctioning Huawei yesterday, the Trump Administration took an escalated step in its trade war with China and in the race to take the technological lead with respect to 5G.
“Yesterday’s action means US tech companies can no longer supply Huawei or any of its 70 affiliated entities worldwide once they are officially added to the Entity List.
“Additionally, foreign companies can no longer supply US-origin parts and components to those entities and certain foreign-made parts and components that incorporate US-origin parts and components may not be able to be supplied either.”
He adds that, in recent years, Huawei has only sourced between 10 and 20% of its parts and components from US companies, there is speculation that these parts and components – including chips, processors, and operating system software – are critical to Huawei’s product offerings and business.
“China has threatened retaliatory sanctions that could impact US telecom and tech companies,” Ward adds.
“Not only will these new sanctions present a compliance challenge to US companies but the sanctions will also create unique business challenges as US companies will need to more carefully screen overseas research and development (R&D) partners to snuff out connections to Huawei.”
Dorsey & Whitney is an international business focusing on US national security law, CFIUS, and international trade compliance law and licensing.
The executive order invokes the International Emergency Economic Powers Act, which gives the president the authority to regulate commerce in response to a national emergency that threatens the US.
Declaring a national emergency with respect to the threats against information and communications technology (ICT) and services in the US and delegates authority to the Secretary of Commerce, the order prohibits transactions “posing an unacceptable risk to the national security of the US or the security and safety of US persons”.