US companies continue trade with Huawei through legal loophole in ban

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A couple of US companies have successfully – and legally – resumed business with the Chinese giant Huawei. Ever since the trade ban imposed on Huawei by Trump, a lot of the American tech companies have severed business ties with the Chinese giant, the most notable among them being the suspension of Huawei’s Android license by Google. However, a couple of microchip companies like Intel and Micron have found a way to continue the trade with the blacklisted company, unlike the other companies. And, why not, when millions of dollars are riding on the relationship, it’s not easy for all the companies to a take hit from a client who seems to be as promising as Huawei, especially when 5G implementation is around the corner and Huawei is going to be play a vital role in the implementation worldwide.

Let us look at it in a little more detail.

Huawei Ban: The Legal loophole

Ideally, the companies in the US – especially the tech companies – should not be maintaining any trade relations with Huawei, which has been blacklisted by Trump. However, as is common in any legal contract or order, there are always loopholes. These loopholes arise from the fact that not all of a company’s business processes occur in the United States itself. Over the course of processes like the conception of the product, assembly and then marketing, international borders are crossed a numerous number of times. Therefore, not all the products of American companies are considered American-made. Companies in the US have started making most of it and labelling the product ‘not made in the US’ to defy the ban.

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As expected, the Trump administration has already gotten wind of these sales that are skipping the trade ban. However, the officials are conflicted as to how they plan on responding to the same. Some feel that these dealings undermine the spirit of the ban imposed by Trump by giving leeway to Huawei. Others are supportive of it, as it allows various American companies to increase trade as well.

During a recent earnings conference call, Micron CEO Sanjay Mehrotra had this to say:-

“To ensure compliance, Micron immediately suspended shipments to Huawei and began a review of Micron products sold to Huawei to determine whether they are subject to the imposed restrictions. Through this review, we determined that we could lawfully resume shipping a subset of current products because they are not subject to export administration regulations and entity list restrictions.”

The role of the Semiconductor association

Apparently, these dealings started a few weeks ago. But these dealings are already worth hundreds of millions of dollars. This represents profits for both Huawei and American companies like Micron and Intel. They were forced to take such legal measures but now exploit loopholes, because the administration did not help them. Apparently, after the blacklisting of Huawei, the Semiconductor Industry Association sent a letter to the White House to grant waivers to a few companies to resume selling components to Huawei. The proposal, however, was rejected, forcing the companies to make use of such loopholes. John Neuffar, the president of the Semiconductor Industry Association, had this to say in a statement:-

“As we have discussed with the U.S. government, it is now clear some items may be supplied to Huawei consistent with the entity list and applicable regulations. Each company is impacted differently based on their specific products and supply chains, and each company must evaluate how best to conduct its business and remain in compliance.”

The decision to ban all the major Chinese, including Huawei, by the Trump administration could back fire. And, both the countries are well aware about it. The mounting pressure on China to agree to the terms laid down by the US seems to be the only way out to ged rid of the ban, at this point in time. On the other side, as the time passes and any delay in releasing the deadlock would only make more US based companies desperate, and may result in employing similar tactics. Eventually, it’s all about losing business worth millions of dollars with each passing day.

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