America adds China’s Huawei to blacklist fearing security issues

Huawei Technologies is facing a big task in improving its business as the U.S. on Thursday officially added the China-based company to a trade blacklist.
Huawei phone campaign in China
The development will put restrictions that will make it difficult for the world’s largest mobile telecom networking and second largest smartphone company to source tech components from American companies, Reuters reported.

Huawei said on Thursday that it would seek ways to resolve the issue. “Huawei will seek remedies immediately and find a resolution to this matter. We will also proactively endeavor to mitigate the impacts of this incident,” the company said in a statement.

American companies will also face the music as they cannot generate revenue from Huawei by supplying components to the Chinese technology major with revenues of $105 billion from telecom carrier, smartphone and enterprise business units.

The Commerce Department issued a rule, promised on Wednesday, putting Huawei and 68 affiliates in more than two dozen countries on its Entity List. Huawei requires government approval from the Donald Trump administration for buying parts and components from American firms.

The report said obtaining such approval will not be easy. The U.S. government will review license applications under a “policy of presumption of denial,” according to a posting on the Federal Register.

The order takes effect immediately, a Commerce Department spokesman said, though it will not be formally published in the Federal Register until Tuesday. The Commerce Department first gave notice on Wednesday that it was adding Huawei to the list.

Earlier, President Donald Trump signed an executive order declaring a national emergency and barring U.S. companies from using telecommunications equipment made by firms posing a national security risk. Huawei will be the first telecom network company to face hurdles in supplying equipment to American telecoms and government agencies.

The United States believes Huawei’s smartphones and network equipment could be used by China to spy on Americans.

The Commerce Department’s notice said Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States.

The order cites a criminal case pending against Huawei in federal court in Brooklyn, New York, over allegations Huawei violated U.S. sanctions against Iran. Huawei has pleaded not guilty in the case.

U.S. in 2016 added ZTE to the entity list over allegations it organized an elaborate scheme to hide its re-export of U.S. items to sanctioned countries.

U.S. companies were prohibited from selling parts and components to ZTE for about two weeks, before the Commerce Department issued a series of temporary general licenses that allowed the company to continue to do business with U.S. suppliers until it agreed to a plea deal a year later.

In April 2018, the Commerce Department slapped a ban on American companies selling components to ZTE after accusing it of breaking an agreement, leading ZTE to cease major operations until it struck a new deal last summer.

Huawei is the world’s third largest purchaser of semiconductors last year, accounting for 4.4 percent of global market share, behind Samsung Electronics and Apple, according to Gartner, a research firm.