U.S. regulators working to plug significant loophole against Huawei

According to two officials from the U.S. Commerce Department, U.S. regulators are open to introducing changes that will plug, as what some see, a loophole in a new rule aimed at curbing the sale of global chip supplies to blacklisted China’s telecoms equipment maker Huawei Technologies Ltd.

The new rule, introduced last Friday by the U.S. Commerce Department expanded U.S. authority to require licenses for sales to Huawei of semiconductors made abroad with U.S. technology, thus amplifying the department’s reach to block the sales of chip supplies to Huawei.

The new rule however only included chips designed by Huawei and did not cover chips shipments sent directly to Huawei’s customers.

This significant loophole will now be plugged.

The rule will “give 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,” said State Department official Christopher Ashley Ford while adding, regulators would watch and “certainly make any changes that we think are necessary.”

Huawei declined to comment.

According to an industry lawyer who preferred the cover of anonymity, one possible way to change the rule would be to tweak the language to capture chips sold “to the benefit of” Huawei, but noted such a change would pose its own challenges.

Speaking as part of the same briefing with Ford, Cordell Hull, a Commerce Department official, said the agency’s enforcement arm “will be looking at efforts to circumvent the rules.

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