Ian Cohen

The Commerce Department is reviewing export license applications to sell to Huawei to “mitigate as much of the negative impacts of the entity listing as possible” and hopes to have decisions “soon,” said Nazak Nikakhtar, Commerce undersecretary-industry and security. Nikakhtar, speaking Tuesday at Commerce's Bureau of Industry and Security’s annual export controls conference, briefly discussed Huawei after Commerce Secretary Wilbur Ross told the conference Huawei won't be removed from BIS’ entity list, confirming July 3 comments from a spokesperson (see 1907050003). Commerce is planning to roll back some restrictions on export licenses to Huawei and evaluate applications based on their U.S. national security impacts. White House Chief Economic Adviser Larry Kudlow said at a Tuesday CNBC event that some Huawei “general merchandise” sales will be permitted. Commerce’s altered approach came from recent feedback from U.S. companies, said Nikakhtar. “We’re moving forward cautiously by recognizing that the right approach is one that allows U.S. businesses to grow while we don’t stifle innovation but importantly while we also protect national security,” she said. President Donald Trump initially made the announcement at the G-20 Summit in Japan, saying the U.S. and China had agreed to resume trade talks (see 1907020060). Nikakhtar said BIS “recognizes the impact our entity listing has on U.S. exporters” and urged companies to make use of the 90-day temporary general license the agency issued in May. She said BIS hopes U.S. industries “consider shifting towards other sources of equipment, software and technology.” Huawei’s inclusion on the entity list “was not taken lightly,” Nikakhtar said. “We should not, nor should we ever, fail to take action because of a company's size or our dependence on export sales.”

The Commerce Department will continue its presumption of denial policy for license applications for exports to Huawei, a Commerce spokesperson said, saying the Chinese company remains on Commerce’s entity list. The department will review export license applications for “their national security impacts” and plans to review licenses “under the highest national security scrutiny,” the spokesperson said. At the G-20 Summit in Japan, President Donald Trump announced the U.S. will loosen restrictions on exports to Huawei and allow U.S. companies to “sell their equipment” as long as “there’s no great national emergency problem.” National Economic Council Director Larry Kudlow said June 30 the U.S. will grant license applications for products that China can easily get elsewhere. There has been uncertainty about which specific products will get export licenses and when the changes will take effect (see 1907020017). “The Department intends to notify companies of decisions on export license applications once the review is complete,” the Commerce spokesperson emailed Wednesday.

With President Donald Trump’s announcement that U.S. companies will be allowed to sell to Huawei (see 1907010070 or 1907010015), it remains unclear how and if the Commerce Department will amend its May notice that added Huawei to the agency’s entity list and banned all exports of items subject to the export administration regulations with a review policy of presumption of denial. “That does not appear to be decided yet,” said William Reinsch of the Center for Strategic and International Studies and Commerce’s former undersecretary for export administration. Reinsch expects Commerce to keep its “presumption of denial” policy “but manage it by adding and subtracting to the” temporary general license. The temporary general license will likely be extended past the original 90-days and be expanded to cover more items, Reinsch said. “The debate will be about what items will be covered,” Reinsch emailed. “Everything else will be subject to a presumption of denial, which means you can apply but don’t hold your breath waiting for a ‘yes.’” Alternatively, Commerce could change its review policy to a case-by-case basis, Reinsch said, noting it’s more likely the agency simply expands its temporary general license. “I think it’s easier for them administratively,” Reinsch said. “If they change it, it would require another” Federal Register notice. Semiconductor Industry Association President John Neuffer called the announcement “good news for the semiconductor industry, the overall tech sector, and the world’s two largest economies.” Commerce plans to grant export licenses for products that China can easily get from other countries, including “various chips and software,” said National Economic Council Director Larry Kudlow Sunday on CBS and Fox News. “Anything to do with national security concerns will not receive a new license from the Commerce Department,” Kudlow said on CBS. A U.S.-China Business Council spokesperson said the specifics of the announcement were unclear but the move likely will provide relief for U.S. exporters. The net effect and next steps in Congress are difficult to predict (see 1907020060).

The Commerce Department plans to issue an advance NPRM for export controls on foundational technologies in coming weeks, said Rich Ashooh, assistant secretary-export administration, at a Bureau of Industry and Security Regulations and Procedures Technical Advisory Committee meeting. Hillary Hess, director of Commerce’s regulatory policy division, said only “it is in the process now.” BIS recently updated the commerce control list (CCL) with five new emerging technologies (see 1905230018). Hess and others previously said BIS was behind in publishing controls on emerging and foundational technologies due to the partial federal government shutdown and the large volume of comments. Tuesday, Ashooh said BIS plans to stagger notices about emerging and foundational technologies, and Hess said it plans to release the ANPRM before any more emerging technologies are added to the CCL. Ashooh said he will try to give “a little more” time for comments on the foundational technology notice but it may not be possible. When Ashooh last asked Commerce Secretary Wilbur Ross for a public comment extension, Ross “very grudgingly” agreed, Ashooh said. “It’s a fast-moving administration,” he said, “and I’m sure that will still apply.” Ashooh said the ANPRM for foundational technologies will be a “very different thought process” from the previous notice for emerging technologies, but will offer another opportunity to communicate with BIS: “Those of you who provided comments on emerging, whatever you didn’t get to say in emerging, you can say in foundational.” Hess said BIS must wait for OMB to OK the ANPRM, which can take up to 90 days. But Hess said usually the OMB “doesn’t take that whole time.” Commerce won't provide straightforward definitions of foundational or emerging technologies in an upcoming notice, said both speakers. “Emerging technologies defies a specific definition,” Ashooh said. The technologies that fit under the emerging technologies category will be defined “on a rolling basis” as they’re proposed. Hess said BIS won’t try to place rigid definitions on any technology category but instead try to “identify the technical parameters.” Commerce looks for a common thread when identifying emerging or foundational technology exports that may be candidates for the CCL, Hess said.

The U.S. temporary general license after it added Huawei to its entity list was “almost no relief” for America's semiconductor industry, which has been hurt severely by the move, said Semiconductor Industry Association CEO John Neuffer. At a Washington International Trade Association discussion last week, Neuffer underscored the importance of the Chinese market to U.S. semiconductor exporters and said the Trump administration should more tactfully negotiate with China. “We would like the U.S. government to better balance its national security concerns with its economic security concerns,” Neuffer said. He said there's an inaccurate perception chipmakers were aided by the Commerce Department Bureau of Industry and Security's temporary move (see 1905290036). “It leaves a major hole for us,” Neuffer said, noting Huawei is one of the “world’s biggest” telecom gear and cellphone providers. “There’s basically no reprieve.” If China’s expected June 1 tariff increase affects U.S. consumer goods including computers and cellphones, which had previously been kept off the tariff lists, Neuffer said his industry will suffer significant losses, partly because China is a large portion of that industry's export market. “Because they are our customers,” Neuffer said, “we will get hit and so will the American consumer.” Neuffer said any U.S.-China decoupling is a “folly,” and the Trump administration’s desire to bring all U.S. supply chains back to the U.S. is “not realistic.” The White House didn't comment Friday.

The Trump administration's decision to examine emerging technologies as candidates for export controls could cost U.S. businesses tens of billions of dollars and threaten thousands of jobs, the Information Technology & Innovation Foundation reported, in an email Monday. If substantial export controls are enacted, ITIF said firms “could lose $14.1 billion to $56.3 billion in export sales over five years." The Commerce Department Bureau of Industry and Security seeks to expand export controls to technologies that are or may soon be essential to national security but aren't export-regulated. A Nov. 19 Federal Register notice sought feedback from companies on “identifying emerging technologies,” including products such as artificial intelligence and machine learning technology." ITIF warned of the harm that it said could result if Commerce defines “an overly restrictive set” of technologies, saying that could “significantly impede competitiveness of certain U.S. industries and stifle their “output, exports and employment growth.”

Satellite groups sought changes to export controls related to a Trump administration effort to revive the National Space Council, in comments that were due Friday. The Aerospace Industries Association asked the Commerce Department for more time before space-related export control regulations, to allow for "open discussions with the government." AIA lacks an "industry consensus" on multiple changes being considered. The association said a member-company asked that Commerce “evaluate” the list and “expand the list of parts and components that do not pose a threat to National Security and Regional Stability.”

The partial government shutdown delayed Commerce Department work on tech export controls, Bureau of Industry and Security officials told an event hosted by the American Bar Association Monday. A Nov. 19 Federal Register notice had sought comment by Dec. 19 “for identifying emerging technologies that are essential to U.S. national security,” with categories including artificial intelligence and machine learning technology. Director Hillary Hess of the BIS regulatory policy office said “we are behind where we thought we were gonna be.” BIS' Kirsten Mortimer and others also cited the number of submissions. Mortimer said BIS received 231 comments, including 215 pages of suggestions on robotics and 220 pages on “position, navigation and timing” equipment. “The shutdown was really not our friend,” Hess said. “We’re just really trying to scramble and get everything organized.”

Industry representatives voiced frustration about e-commerce, seeking a more-streamlined filing system and crackdown on foreign sellers. A common complaint was lack of transparency from foreign companies when they sell through online markets, a Customs and Border Protection event was told Friday. The foreign e-commerce sellers bypass U.S. safety and testing regulations, disproportionately placing the “burden of enforcement” on the brand owners of the items, said Rebecca Mond, Toy Association vice president-federal government affairs. That leads to lapses in enforcement, she said. Cornelia Steinert, Canon Virginia senior manager-international trade, said there's “simply no visibility” for importers of e-commerce products, especially small shipments. “How do you know what they’re ordering?” she said. “A lot of times, you can’t tell where the products are being shipped from.” She wants improvements to CBP manifest filings. Footwear Distributors and Retailers of America CEO Matt Priest said one of the footwear industry’s biggest issues is “unauthorized third-party sellers” online. Priest suggested more communication between CBP and industry. “The prevalence of e-commerce has just been so difficult for our members to get their hands around” on enforcement issues, he said. That multiple filings are made to CBP and each foreign government agency involved in selling a product online is problematic, said Cindy Allen, FedEx Trade Network vice president-regulatory affairs and compliance.