August 19, 2019 / 12:11 PM / a month ago

U.S. grants Huawei another 90 days to buy from American suppliers

WASHINGTON (Reuters) - The United States will extend a reprieve that permits China’s Huawei Technologies to buy components from U.S. companies to supply existing customers, the Commerce Department said on Monday, but it also moved to add more than 40 of Huawei’s units to its economic blacklist.

The extension, dated Thursday and first reported by Reuters on Friday, was announced by U.S. Commerce Secretary Wilbur Ross, even though President Donald Trump suggested on Sunday that no such reprieve would be granted.

Shares of U.S. chip makers that sell to Huawei rose, including those of Qualcomm , Intel and Micron Technology.

The 90-day extension “is intended to afford consumers across America the necessary time to transition away from Huawei equipment, given the persistent national security and foreign policy threat,” the department said in a statement.

“As we continue to urge consumers to transition away from Huawei’s products, we recognize that more time is necessary to prevent any disruption,” said Ross.

Huawei said in a statement that the temporary extension “does not change the fact that Huawei has been treated unjustly. Today’s decision won’t have a substantial impact on Huawei’s business either way.”

Trump had indicated over the weekend that there would be no extension, saying what would happen would be the “opposite” of what was reported on Friday. “We’re actually open not to doing business with them,” Trump said on Sunday.

The U.S. government blacklisted Huawei in May, alleging the Chinese company is involved in activities contrary to U.S. national security or foreign policy interests.

Shortly after the blacklisting, the Commerce Department allowed Huawei to purchase some American-made goods in a move designed to minimize disruption for its customers, including rural U.S. telecommunications firms that use Huawei equipment in their networks. Ross said the latest extension also was aimed at aiding those same customers.

At the same time, he said he was adding 46 Huawei affiliates to the so-called “Entity List” - a list of companies effectively banned from doing businesses with U.S. firms - raising the total number to more than 100 Huawei entities covered by the restrictions.

The list includes Huawei affiliates in Argentina, Australia, Belarus, China, Costa Rica, France, India, Italy, Mexico and numerous other countries.

Huawei said it opposes the decision to add another 46 affiliates to the Entity List. “It’s clear that this decision, made at this particular time, is politically motivated and has nothing to do with national security,” the company said.

‘PLENTY OF NOTICE’

The extension, through Nov. 18, renews an agreement continuing the Chinese company’s ability to maintain existing telecommunications networks and provide software updates to Huawei handsets.

The Commerce Department also said on Monday it is requiring the exporter, re-exporter, or transferor to obtain a certification statement from any Huawei entity prior to using the temporary general license.

Asked what will happen in November to U.S. customers of Huawei, Ross said: “Everybody has had plenty of notice of it, there have been plenty of discussions with the president.”

The semiconductor industry has lobbied to sell non-sensitive items that Huawei could easily buy abroad, arguing that a blanket ban harms American companies.

When the Commerce Department blocked Huawei from buying U.S. goods earlier this year, it was seen as a major escalation in the Sino-U.S.trade war.

As an example, the blacklisting order cited a pending federal criminal case concerning allegations that Huawei violated U.S. sanctions against Iran. Huawei has pleaded not guilty in the case.

The order noted that the indictment also accused Huawei of “deceptive and obstructive acts.”

At the same time, the United States says Huawei’s smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied.

Huawei, the world’s largest telecommunications equipment maker, is still prohibited from buying American parts and components to manufacture new products without additional special licenses.

FILE PHOTO: A Huawei company logo is pictured at the Shenzhen International Airport in Shenzhen, Guangdong province, China July 22, 2019. REUTERS/Aly Song

Many Huawei suppliers have requested the special licenses to sell to the firm. Ross told reporters late last month he had received more than 50 applications, and that he expected to receive more. He said on Monday that there were no “specific licenses being granted for anything.”

Washington trade lawyer Doug Jacobson said it is not surprising the extension was granted: “It takes time for telecom providers to find alternative equipment suppliers.”

Of $70 billion that Huawei spent buying components in 2018, about $11 billion went to U.S. companies.

Reporting by David Shepardson; Editing by Steve Orlofsky, Bill Rigby and Dan Grebler

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