Firms Test Limits of Commerce Department Ban on Huawei

Although the White House has banned U.S. companies from selling technology to Huawei Technologies, some chipmakers, including Intel and Micron, are doing so by labeling goods produced overseas as not being “American-made.” The ban actually begins in mid-August, and U.S. suppliers, their attorneys and the Trump administration are mulling over if and how the ban impacts current sales. Meanwhile, FedEx has filed a lawsuit against the U.S., saying it cannot police the millions of packages it sends.

The New York Times reports that some U.S. officials “feel that the sales violate the spirit of the law and undermine government efforts to pressure Huawei, while others are more supportive because it lightens the blow of the ban for American corporations.” According to Huawei, it buys about $11 billion in U.S. technology every year. U.S. companies that sell to Huawei are concerned that the ban will result in the loss of “valuable business to a foreign rival.”

Micron, for example, competes with South Korean companies Samsung and SK Hynix to sell memory chips to Huawei. Micron chief executive Sanjay Mehrotra reported that his company stopped shipping to Huawei after the Commerce Department banned sales last month but, two weeks ago, resumed sales after examining the rules more closely and determining they were legal. “However, there is considerable ongoing uncertainty around the Huawei situation,” Mehrotra said.

Law firm Akin Gump partner Kevin Wolf, a former Commerce Department official, “has advised several American technology companies that supply Huawei” that the ban “did not prevent American suppliers from continuing sales, as long as the goods and services weren’t made in the United States.” He clarified, however, that “if the chipmaker provides services from the United States for troubleshooting or instruction on how to use the product, for example, the company would not be able to sell to Huawei even if the physical chip were made overseas.”

Wolf added that the ongoing trade war with China is “causing companies to fundamentally rethink their supply chains.” Peterson Institute for International Economics research fellow Martin Chorzempa said that U.S. companies could take production out of China — but might also “move the tech development out of the U.S. if that becomes problematic.”

The Wall Street Journal reports that FedEx filed a lawsuit in a Washington, D.C. federal court, stating that, “the U.S. Commerce Department’s latest restrictions are essentially forcing FedEx to police millions of packages it ships daily to ensure prohibited items aren’t being exported to Huawei.” “FedEx is a transportation company, not a law-enforcement agency,” stated the company.

China, meanwhile, is investigating FedEx after the company “misrouted some of Huawei’s packages, including two that were sent to its global hub in Memphis, Tenn., instead of China.” Last week, FedEx was forced to apologize when a Huawei smartphone shipped by a U.K. journalist to the U.S. was returned to its sender.

UPS spokesperson Steve Gaut said the company has “not had any particular issues with shipping for Huawei or any of our other customers, and we would not be supportive of joining such a lawsuit or making such claims.”