Commerce Dept. bans Huawei, 70 affiliates from sourcing U.S. components

The U.S. Department of Commerce has officially placed Huawei and 70 of its affiliates on the Bureau of Industry and Security’s (BIS) “entity list,” effectively banning the company from buying components from U.S. companies without government approval.

The commerce ban does not prohibit U.S. telecom companies from purchasing Huawei gear, but instead bans Huawei from sourcing its supply chain components from U.S. companies. The move will hamper Huawei’s ability to conduct business internationally because of its reliance on U.S. companies for components for its gear, according to a Reuters report citing unnamed U.S. officials.

The move comes one day after U.S. president Donald Trump declared a national emergency in relation to telecom equipment, claiming that “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services.” Trump’s executive order prohibits U.S. companies from sourcing telecom gear from companies that pose a national security risk, but does not name Huawei nor China as specific threats.

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Commerce Secretary Wilbur Ross said the ban is the result of President Trump’s request that the department to be “vigilant in its protection of national security activities.”

“This will prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” Ross said in a statement.

In a statement, Huawei argued the ban would hurt American efforts to roll out 5G networks. “Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior. yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployment, and eventually harming the interests of U.S. companies and consumers,” the company said. “Unreasonable restrictions will infringe upon Huawei's rights and raise other serious legal issues.”

“We are ready and willing to engage with the U.S. government and come up with effective measures to ensure product security,” Huawei said.

The Commerce department made a similar move in 2016 against China-based telecom equipment maker ZTE, over allegations that ZTE was breaking U.S. sanctions. The ban had a devastating effect on ZTE’s business, causing the company to suspend its operations, as it was unable to source components from U.S. companies. Last year, ZTE reached an agreement with the U.S, government to pay over $1 billion in fines to have the ban suspended.