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Trump administration moves toward blocking more sales to Huawei-sources

Credit: REUTERS/Hannibal Hanschke

The U.S. government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to China's Huawei, as it seeks to squeeze the blacklisted telecoms company, two sources said.

By Alexandra Alper, Karen Freifeld and Stephen Nellis

WASHINGTON, Jan 14 (Reuters) - The U.S. government is nearing publication of a rule that would vastly expand its powers to block shipments of foreign-made goods to China's Huawei, as it seeks to squeeze the blacklisted telecoms company, two sources said.

The U.S. Commerce Department in May placed Huawei Technologies Co Ltd HWT.UL on a trade blacklist, citing national security concerns. That allowed the U.S. government to restrict sales of U.S.-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.

But U.S. businesses say an effort to enable the government to regulate more sales to Huawei to include low-tech items made overseas with very little U.S. technology could end up needlessly hurting U.S. companies while encouraging Huawei to source more goods abroad.

Reuters reported in November that Commerce was considering broadening the De minimis Rule, which dictates how much U.S. content in a foreign-made product gives the U.S. government authority to regulate an export.

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.

According to one of the people, the Commerce Department sent the rule to the Office of Management and Budget, following an interagency meeting last week.

If other government agencies sign off on the measure, the rule could be issued in a matter of weeks as a so-called final rule, with no opportunity for public comment before it goes into effect, the people said.

Commerce has also drafted a regulation that would expand the so-called Foreign Direct Product Rule, which subjects foreign-made goods that are based on U.S. technology or software to U.S. oversight. This would be broadened to include low-tech items made abroad that are based on U.S. technology and shipped to Huawei, the people said.

In December, Huawei, the world's largest smartphone maker, reported an 18 percent jump in revenue for 2019 and a 20 percent increase in shipments of smartphones.

(Writing by Alexandra Alper; Editing by Chris Sanders and Cynthia Osterman)

((Alexandra.Alper@thomsonreuters.com; +1(202)354-5865; Reuters Messaging: alexandra.alper.thomsonreuters.com@reuters.net - https://twitter.com/alexalper?lang=en))

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