U.S. Department of Commerce announces expansion of foreign direct product rule restricting Huawei's access to certain foreign-produced items

On 15 May 2020 the U.S. Department of Commerce announced an Interim Final Rule that would expand the scope of General Prohibition Three's (GP 3) foreign direct product rule, further restricting transfers to China's Huawei Technologies Co. Ltd. and its affiliates (collectively, Huawei) that have been designated on the Commerce Department's Bureau of Industry and Security (BIS) Entity List.

According to BIS, the purpose of the rule is to protect U.S. national security by extending U.S. export controls jurisdiction to certain non-U.S. items when destined for Huawei. The expansion is intended to counter Huawei's efforts to undermine U.S. export controls by restricting the use of U.S. technology and software to design and manufacture semiconductors abroad for Huawei. In its press release, the Commerce Department made clear that these new restrictions are aimed primarily at HiSilicon, Huawei's chip design arm. HiSilicon relies on foundries located outside of mainland China to produce certain high-end five nanometer (nm) and seven nm chips, which are used in mobile phones and 5G base stations.

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