New Huawei restriction in limbo after Pentagon disagrees with Commerce approach

FILE PHOTO: Huawei’s first global flagship store is pictured in Shenzhen, Guangdong province, China October 30, 2019. REUTERS/Aly Song

WASHINGTON (Reuters) – The U.S. Commerce Department has put on hold a rule aimed at further reducing sales to China’s Huawei Technologies amid pushback from the Defense Department, people familiar with the matter said.

The move leaves the proposal in jeopardy, but President Donald Trump’s administration plans a high-level meeting next week to discuss the issue, one of the sources said, adding that the Pentagon cited concerns about the impact on U.S. businesses.

The Commerce Department did not immediately comment. Huawei declined to comment.

Commerce in May placed Huawei on a trade blacklist, citing national security concerns. That allowed the U.S. government to restrict sales of American-made goods to the company and a small number of items made abroad that contain U.S. technology.

Under current regulations, key foreign supply chains remain beyond the reach of U.S. authorities, fueling frustration among China hawks within the administration and a push to expand U.S. authority to block more shipments to Huawei.

Reuters reported in November that the Commerce Department was considering broadening the rule that dictates how much American content in a foreign-made product gives the U.S. government authority to regulate sales.

Under current regulations, the United States can require a license or block the export of many high-tech products shipped to China from other countries if U.S.-made components make up more than 25% of the value.

According to two people familiar with the matter, Commerce has drafted a rule that would lower the threshold only on exports to Huawei to 10% and expand the purview to include non-technical goods like consumer electronics including non-sensitive chips.

U.S. businesses argue that enabling the government to regulate more sales to Huawei to include low-tech items made overseas with very little U.S. technology would end up needlessly hurting American companies while encouraging Huawei to source more goods abroad.

Reporting by Alexandra Alper, Karen Freifeld, David Shepardson and Mike Stone in Washington; editing by Jonathan Oatis


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