U.S. Regulators May Close “Loophole” With Huawei Chip Curb

Regulators are considering closing a “loophole” in a new rule designed to stop computer hardware being sold to Chinese telecommunications equipment company Huawei amid tightening export controls on the company. The new rule would expand American authority to require a license for semiconductors made outside of the U.S. with American technology and sold to Huawei.

The alleged loophole is that this new rule only includes chips designed by Huawei and does not include shipments directly sent to Huawei customers. When addressing if the rule will be changed to fix the loophole a State Department official told Reuters that “the rule itself would provide regulators with the insight to determine if it should be altered.” The U.S. government has allowed other companies to work with Huawei with a temporary license, which the Department has extended for 90 days; the company has allegedly exploited these license deals. Huawei has also been accused of using U.S. technology in its designs.

The rule “give[s] us a great deal more information upon which to base export control decisions as we move forward and try to find the right answer to these challenges including by adapting, if we need to, if Huawei tries to work around our rules in some way,” Ford said. He also noted that U.S. “regulators would watch and ‘certainly make any changes that we think are necessary.’” The Department “will be looking at efforts to circumvent the rules.”

Huawei has faced increasing scrutiny from American regulators amid fears that it poses a national security threat. It allegedly violated U.S. sanctions and has been criticized for its alleged ties to the Chinese Communist Party. As a result, Huawei has been placed on the Commerce Department’s “entity list,” which some state does not do enough to prevent Huawei from getting supplies.

This comes after the administration extended its Huawei ban until May 21, 2021, which essentially bans Huawei from American communications networks. A Senate bill was also passed to replace Huawei and ZTE equipment.

Huawei recently called the new rule “pernicious” and “arbitrary.” In a statement, the telecom company stated, “The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests.”