Rural Carriers Using Huawei Gear Get More Time to Adjust
The Commerce Department gave rural U.S. carriers that use Huawei equipment a 90-day reprieve Monday from a ban on doing business with the company. At the same time, the U.S. ratcheted up pressure on the Chinese vendor, adding 46 more of Huawei’s non-U.S. affiliates to a list of subsidiaries subject to export restrictions. Three months ago, the U.S. similarly gave U.S. carriers more time to deal with sanctions (see 1905210013). The delay means Huawei can continue to send updates to handsets and maintain existing networks and equipment.
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“The administration continues to look for ways to avoid having to enforce the Huawei decision,” said Zack Cooper, China expert at the American Enterprise Institute. “Many will therefore assume that these steps are likely to be followed by another reprieve in 90 days,” he said: Even if the “companies do eventually have to alter their business relationships with Huawei, the Chinese may already have dodged much of the damage. Some in the White House wanted to use the entities list to give time for other companies to catch up. But this has given Huawei ample warning and time to adjust to the entities listing.”
The decision is “a clear win” for Huawei, Cooper told us: “They’ve called the Trump administration’s bluff.”
“Some of the rural companies are dependent on Huawei,” Commerce Secretary Wilbur Ross said Monday on Fox Business Network: “We’re giving them a little more time to wean themselves off." Carriers have had “plenty of notice” on the sanctions against Huawei, he said.
“For our members, it’s a good sign that the government is taking more time and doing more diligence on how this impacts everything across the country,” said Carri Bennet, Rural Wireless Association general counsel. The administration hasn't released promised export rules, Bennet told us. The extension “is just part of buying more time to figure all of this out,” she said: “They’re realizing there’s a lot more to it than simply" handing down rules.
Ross stressed on Fox that the U.S. hasn’t blinked. “The big news today is that we have decided to add 46 more Huawei subsidiaries to the entity list.” he said: “When something is added to the entity list, it means that the American companies cannot sell to it, except if they get a specific license." Adding the affiliates is intended to close “loopholes” and make it more difficult for Huawei to get around the restrictions, he said.
President Donald Trump told reporters Sunday the tariffs against China haven't hurt the U.S., but China is losing jobs. “I don’t want to do business at all” with Huawei “because it is a national security threat,” Trump said.
The U.S., not China, will be hurt by stopping the sale of components to Huawei, said Center for Strategic and International Studies Senior Vice President James Lewis. “Most of the items that can continue to be sold are ‘end items,’ final products like semiconductors,” Lewis blogged Monday: “Huawei cannot make modern mobile phones without these chips. But refusing to sell them does not mean that Huawei would go out of business. It will develop alternate sources of supply, and in the interim, the Chinese government is not going to let its favorite national champion collapse because of U.S. pressure. China will pay what it takes to keep Huawei going.”
“The net effect is to build pressure on China through Huawei and to keep them off balance,” said Recon Analytics’ Roger Entner: “The thinking is that the more China plays catch-up with what the U.S. does, the stronger the U.S. position. This way China is preoccupied with reacting to what the U.S. does rather than develop its own plan.” Huawei didn't comment.