U.S. Commerce Department broadens ‘De minimis Rule’ to block sales of U.S. technology and goods to Huawei

On Wednesday, two sources stated, the U.S. government is nearing the publication of a rule that would significantly expand its powers to block shipments of foreign-made goods to Huawei.

The development comes in the wake of the U.S. Commerce Department placing Huawei Technologies Co Ltd on a trade blacklist in May 2019, citing national security concerns thus allowing the government to restrict sales of U.S.-made goods to the Chinese company.

Current regulations do not cover Huawei’s key foreign supply chains, which have led to frustrations among China hawks within the administration,

In November, according to media reports, the U.S. Commerce Departement was considering broadening the De minimis Rule, which defines to what extent U.S. content in foreign-made product provides the U.S. government the authority to regulate an export.

Under current regulations, the U.S. can impose a license or block the export of many high-tech products shipped to China from other countries if U.S.-made components make up more than 25% of the value of the export.

According to two sources familiar with this matter, the Commerce Department has drafted a rule which lowers this threshold for Huawei to 10% while expanding the purview to include non-technical goods including consumer electronics which contains non-sensitive chips.

According to one of the sources, the Commerce Department had sent the rule to the Office of Management and Budget, following an interagency meeting last week.

Once other government agencies agree on the measure, the rule could come into play in a matter of weeks, said sources.

The U.S. Commerce Department has also drafted a bill that expands the Foreign Direct Product Rule, which subjects foreign-made goods that are based on U.S. technology or software, to U.S. oversight.

This regulation will now be broadened to include low-tech items made abroad that are based on U.S. technology and shipped to Huawei, said sources.

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