Since Huawei and its non-U.S. affiliates were added to the US Dept of Commerce, Bureau of Industry and Security (BIS)’s export controls entity list, the BIS has imposed additional restrictions on Huawei, making it difficult to do business with Huawei unless a company has a license.

Your U.S. company is not allowed to export, reexport or transfer (in-country) any items controlled by the EAR (Export Administration Regulations) to Huawei, unless you have a license. Even if the customer is a Huawei location within the U.S., your company would have to find out if the items are meant to be exported to Huawei and its listed entities abroad.

On the other hand, companies may be able to import Huawei goods into the U.S. However, your company would be prohibited from returning the phones to Huawei without a license.

The Commerce Dept has expanded the foreign-made direct product rule to prevent Huawei from subverting US export controls. Even items manufactured outside the U.S. may be subject to export control restrictions, and your company may be forbidden from selling through a third party, to Huawei and its affiliates these items if they use US technology or software controlled by the EAR or produced in a manufacturing plant or by equipment that is the direct product of controlled US technology or software. You may also be prohibited from providing foreign-made items that include US technology or software to a customer who in turn re-sells it to Huawei. Thus, even though your direct customer is not on the entity list, if the customer in turn re-sells the controlled technology to Huawei or another company or person on the Commerce Dept’s entity list, that is a violation of the export controls regulations.


While a violation of the export controls on Huawei requires the US government to show that the company had “knowledge” of the violation, company officers cannot just look the other way and pretend they did not know a violation was occurring. Any U.S. company doing business in China needs to have sophisticated “Know Your Customer” (KYC) procedures and a compliance program in place. BIS has a helpful list of “Red Flag” indicators, see

In general, you need to know your customer’s customer and suppliers. Your company cannot just ignore any red flags. For example, if the customer does not want to provide information on their own customers (the end-user) and is vague and evasive, that is a red flag. Or if the customer does not know anything about the product they are purchasing, and declines routine installation and maintenance, these are all red flags.

Your company needs to protect its entire supply chain, and ensure consistent export and economic sanctions compliance at all steps in the process. The company must be vigilant about what its branches, offices abroad and affiliates are doing. Also, with any mergers and acquisitions, the company should follow-up and ensure the newly acquired subsidiary or affiliate is following all the rules. You must provide ongoing training to your employees. You need an effective communication process for employees to communicate red flags and other negative information up the company’s hierarchy. Top management must be on board with export and economic sanctions compliance and keep updated on the issues. Internal audits are important to uncover inadvertent or intentional subverting of the policies by employees down the line.

If your company wishes to do business with Huawei in any EAR-controlled items or technology, you need to apply to BIS for a license. Unfortunately, the US government has a presumption of denial when reviewing license applications. However, Intel and AMD received some licenses from BIS to supply chips for Huawei’s PCs and servers. Samsung Display of South Korea also succeeded in getting a license from BIS to provide its panels to Huawei Technologies.

In addition to the export control regulations, your company also must be concerned with economic sanctions issues if dealing with Huawei, as the Chief Financial Officer Wanzhou Meng and the company are currently facing an indictment charging criminal violations of the IEEPA and economic sanctions against Iran and North Korea. See,

Huawei is not the only company you need to be worried about if doing business in China. This applies to any industry seeking to export to China or Chinese companies, as now many Chinese and Hong Kong companies and persons are not only on the export controls Entity List, but also OFAC’s Specially Designated National (SDN) list which are subject to economic sanctions. For example, Xinjiang Production and Construction Corps (XPCC), certain of its officials, and its multitudinous subsidiaries are subject to US economic sanctions for violating the human rights of the Uyghurs. See my video on Youtube, on OFAC’s 50 percent rule and XPCC,

Plus, contrary to the export controls issues, any violation of the economic sanctions rules is generally considered to be strict liability (i.e., the government does not have to prove that you or your company knew or realized there was a violation).

Thus, doing business not only with Huawei but also with a myriad of other Chinese companies, officials, and Hong Kong officials, may expose your company to violations of the export controls and economic sanctions regulations. Any company wishing to pursue the Chinese market or supply chain must have stringent compliance, KYC and due diligence procedures in place.

Copyright 2020 © Heidi J Meyers, all rights reserved.