Effective today, Thursday, June 18, 2020, the US Department of Commerce’s Bureau of Industry and Security (BIS) has issued an interim final rule that lifts the prohibition on certain standards-setting related activities involving Huawei companies on the Entity List. The rule allows companies involved in certain standards-setting organizations to share certain technology subject to the EAR with Huawei Technologies Co. Ltd. and its non-US affiliates that are on the Entity List (collectively, Huawei) without the need for an export license, for the purpose of developing joint standards.
This new rule does not authorize all standards-related activities with Huawei, but it should ease at least some of the compliance burden of standards organizations and their members.
Background
In May 2019, Huawei was added to the BIS Entity List (the Entity List), thereby restricting exports of items subject to the US Export Administration Regulations (EAR) to Huawei. Along with the addition of Huawei to the Entity List, BIS announced in May 2019 the Temporary General License (TGL), which, among other things, temporarily permitted engagement with Huawei, as necessary, for the development of 5G standards by a duly recognized standards body.
In BIS’ first extension of the TGL and a related BIS advisory opinion published in August 2019, however, BIS repealed this authorization, stating in its advisory opinion that “a variety of activities in the standards setting or development context are prohibited absent a license or other authorization from BIS if [Huawei] is involved.”
With the interim final rule that was published today, BIS has rescinded its August 2019 guidance and carved out a space for certain permissible exports to Huawei in relation to standards-setting activities.
Analysis
The recent rule change authorizes certain exports without a license to Huawei in connection with certain standards-setting activities, however, there are limitations.
The new rule is limited in the scope of authorized exports as it concerns: (1) technology; (2) standards and standards organizations; and (3) Entity List recipients:
First, only technology subject to the EAR that is designated as EAR99 or controlled on the Commerce Control List (CCL) for anti-terrorism reasons (i.e., AT-only controlled) benefits from the new rule. All other technology that is subject to the EAR is still subject to the Entity List restrictions on exports to Huawei, unless authorized by BIS.
Second, the definitions of “standards” and “standards organizations” reference the Office of Management and Budget’s Circular A-119 (OMB Circular A-119). The OMB Circular A-119 definitions of “standard”[1] and “standards organization”[2] mean that only certain organizations that self-identify as standards-setting organizations will qualify as “standards organizations” for the purposes of this new rule.
Third, the only Entity List companies authorized under this amended rule as recipients are the Huawei companies on the Entity List. Other Chinese companies and institutions on the Entity List (e.g., Hangzhou Hikvision Digital Technology Co., Ltd.) cannot benefit from this revised rule.
Publication, Revision, and Re-Issuance:
The interim final rule was published today with immediate effect and a 60-day comment period, until August 17, 2020. It is therefore possible that BIS will issue a revised final rule later in 2020.
_____
[1] “Standard” is defined as a “(i) common and repeated use of rules, conditions, guidelines or characteristics for products or related processes and production methods, and related management systems practices; (ii) the definition of terms; classification of components; delineation of procedures; specification of dimensions, materials, performance, designs, or operations; measurement of quality and quantity in describing materials, processes, products, systems, services, or practices; test methods and sampling procedures; formats for information and communication exchange; or descriptions of fit and measurements of size or strength; and (iii) terminology, symbols, packaging, marking or labeling requirements as they apply to a product, process, or production method.”
[2] “Standards organization” is defined as “an association, organization, or technical society that plans, develops, establishes, or coordinates voluntary consensus standards using a voluntary consensus standards development process that includes the following attributes or elements: openness . . . balance . . . due process . . . appeals process . . . [and] consensus.”
