BIS Further Targets Chinese Firms by Amending the Foreign Direct Product Rule to Restrict Flow of Certain Foreign Produced Items to Huawei and Its Non-U.S. Affiliates and by Adding Thirty-Three Entities to the Entity List
Over the last few weeks, the Department of Commerce’s Bureau of Industry and Security (“BIS”) has taken two sets of actions further targeting Chinese firms. First, on Friday, May 15, BIS announced new rules further tightening export controls targeting Huawei Technologies and its non-U.S. affiliates. Second, on Friday, May 22, BIS announced that it would add thirty-three China-related entities, including certain entities in the United Kingdom and in Hong Kong, to the Entity list, including twenty-four “governmental and commercial organizations” for “supporting procurement of items for military end-use in China” and nine entities “complicit in human rights violations and abuses” in Xinjiang. The additions to the Entity List will be published in the Federal Register on June 5, 2020. Once the additions to the Entity List become effective on June 5, 2020, it will be prohibited to export, reexport, or transfer items “subject to the EAR” to any of the designated entities, without authorization from BIS. In light of these two developments, foreign firms with Huawei dealings should review those dealings to ensure that they comply with the amended Foreign Direct Product Rule and businesses with international operations should carefully review their counterparts to ensure that they are not providing any items “subject to the EAR” to any of the entities that will be included on the Entity List.