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U.S. Adds 38 New Huawei Affiliates to Entity List While Again Expanding Foreign-Produced Direct Product Rule

Huawei

U.S. Adds 38 New Huawei Affiliates to Entity List While Again Expanding Foreign-Produced Direct Product Rule

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has announced that it is further restricting access by Huawei Technologies Co. Ltd. and its designated non-U.S. affiliates (“Huawei”) to U.S.-produced technology and software. BIS first added Huawei to its Entity List on May 15, 2019 and has continued to impose additional export restrictions on Huawei under the U.S. Export Administration Regulations (“EAR”). Most recently, BIS published a Federal Register notice to implement the following enhancements. Although BIS published this Federal Register notice on August 20, 2020, the following rule changes took effect retroactively as of August 17, 2020:

Addition of Thirty-Eight New Huawei Affiliates to the Entity List. In its announcement, BIS added thirty-eight (38) additional Huawei affiliates to the Entity List. This action now brings the total number of Entity List-designated Huawei affiliates to one hundred and fifty-two (152). The EAR generally prohibits anyone, anywhere in the world from supplying products, software or technology that is “subject to the EAR” to these Huawei affiliates without a BIS license.

Expiration of Huawei Temporary General License. BIS had previously issued (and then, on multiple occasions, extended) a Temporary General License which permitted certain transactions with Huawei Entity List affiliates in order to support existing networks, equipment and handsets that were in existence prior to Huawei’s initial Entity List designation on May 16, 2019. In its Federal Register notice, BIS announced that it would be allowing the Temporary General License to expire. As a result, pursuant to the expiration date set in its most recent renewal notice, the Huawei Temporary General License expired effective August 13, 2020.

Anyone who previously utilized the Temporary General License was required to obtain certain compliance certifications in connection with transactions conducted pursuant to the Temporary General License and the EAR will require those persons to retain those certifications in accordance with the EAR’s recordkeeping requirements.

Permanent Authorization for Cybersecurity Research and Vulnerability Disclosures to Huawei Entity List Companies. The Temporary General License also contained a provision which authorized the disclosure of certain information to Huawei Entity List companies in order to assist with maintaining the integrity and reliability of existing data networks. After allowing the remainder of the Temporary General License to expire, BIS permanently codified this narrow exception into the EAR in order to promote cybersecurity.

Expansion of the Huawei Foreign-Produced Direct Product Rule. In May 2020, BIS amended the EAR’s foreign-produced direct product (FPDP) rules to designate the following items as “subject to the EAR”: (i) foreign-produced items produced or developed by a Huawei Entity List affiliate through the use of technology or software controlled under certain Export Control Classification Numbers (ECCNs), and (ii) foreign-produced items that are produced using equipment which is the direct product of U.S. origin software or technology controlled under certain ECCNs and also produced according to software or technology specifications produced or developed by a Huawei Entity List affiliate. BIS has now significantly expanded this rule.

As amended, the new Huawei FPDP rule now completely disregards whether foreign-produced items produced by a 3rd party are produced according to Huawei specifications and instead extends the Huawei FPDP rule’s coverage to all foreign-produced items resulting from the specified software, technology or production equipment which are intended for incorporation into or for use in the “production” or “development” of any “part”, “component”, or “equipment” to be produced, purchased or ordered by a Huawei Entity List company or otherwise included in any transaction featuring a Huawei Entity List company as a “purchaser”, “intermediate consignee”, “ultimate consignee” or “end-user” (terms in quotation marks in the previous sentence are defined terms under the EAR).

As a result of these amendments, a much broader range of foreign-produced items are now “subject to the EAR” and therefore prohibited for export, reexport or in-country transfer to any Huawei Entity List company without an appropriate BIS license.  Although BIS will normally review such license applications on a “presumption of denial” standard, these amendments did create an exception which states that BIS will evaluate license applications involving Huawei Entity List companies on a “case-by-case” basis when they involve foreign-produced telecommunications systems, equipment and devices below the 5G level.

The amendment did feature a savings clause, which allowed the continuance of certain qualifying transactions which were initiated prior to August 17, 2020.

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Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

Huawei equipment

UK to Ban Huawei Equipment from its 5G Network While U.S. Announces Visa Restrictions

On July 14, 2020, the United Kingdom announced that it will ban Huawei Technologies, Co. Ltd. (“Huawei”) equipment from its 5G network. Effective December 31, 2020, Telecoms operators in the UK can no longer purchase Huawei equipment and have until 2027 to remove Huawei technology from their networks, with broadband companies receiving an additional two years to do so. The older 2G, 3G, and 4G networks will not need to have existing Huawei equipment removed.

The UK’s decision arrives after UK intelligence determined that they could no longer be confident in the security of the new equipment provided by Huawei. This announcement marks a change in policy from six months ago, when UK Prime Minister Boris Johnson had previously agreed that Huawei could take up to a 35 percent share of the 5G market.

In response, U.S. Secretary of State Mike Pompeo tweeted that this decision by the UK’s decision “advances Transatlantic security in the [5G] era while protecting citizens’ privacy, national security, and free-world values.”  Secretary Pompeo also announced that the U.S. Department of State will impose visa restrictions on Huawei employees, which, according to Secretary Pompeo, are meant to punish complicity in human rights abuses. Specifically, the new U.S. visa restrictions on Huawei employees allege that Huawei is an extension of the Chinese Communist Party’s “surveillance state” in the Xinjiang Uighur Autonomous Region.

Additionally, Huawei and 114 of its affiliate companies remain subject to extensive export restrictions due to their designation on the U.S. Commerce Department – Bureau of Industry and Security’s “Entity List” while the Commerce Department continues to finalize forthcoming “foreign adversary” rules which will likely restrict the use of Huawei equipment and services in various U.S. information and communications technology or services (“ICTS”) transactions (Husch Blackwell’s coverage of Huawei developments is consolidated at this link and we have covered the proposed “foreign adversary” ICTS rules here and  here).

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Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.

Camron Greer is an Assistant Trade Analyst in Husch Blackwell LLP’s Washington D.C. office.

asset tracking

Why Fleet Managers Need Mobile IoT Asset Tracking

Not long ago, local grocery stores were lined with empty shelves. Toilet paper and hand sanitizer shortages gripped headlines from California to New York. In the throes of the COVID-19 era, demand for basic goods had so abruptly shifted that transportation and logistics companies were forced to react at breakneck speed to the unprecedented surge, all while maintaining worker safety.

The issue is, managers can only truly manage what they see – and need to know exactly where vehicles and equipment are in order to properly use them. Real-time visibility of critical assets, which can be anything from fleet equipment to humans, is essential for operating a supply chain at peak efficiency. The pandemic is exposing a need for access to insights for moving assets across all sectors, especially when multi-tiered distribution models are relied upon. Fast, real-time decisions are only delivered when a fleet manager knows the real-time location of all tools in their arsenal. Fleet managers need an end-to-end asset tracking solution that works anywhere, indoors or outdoors, with no-nonsense setup to scale.

GPS Sucks More than Just Power

Historically, fleet managers have leaned on GPS to track higher value assets, though being able to yield a location report has been far from guaranteed. Due to GPS’ inherent limitations, enterprises were only able to pinpoint assets when they had a clear line of sight to the sky. Yet many times, equipment and goods were inside a container or warehouse, rendering GPS useless. With steep price tags and quickly drained battery life, GPS trackers are difficult to maintain and to frequently replace on the field. If a fleet manager wanted to layer on indoor coverage, they’d need to accumulate additional costs and infrastructure for the incorporation of Wi-Fi or Bluetooth Low Energy (BLE). Amalgamating these location solutions with other existing software platforms to offer valuable data becomes a burden on crucial resources: finances, time, and manpower.

Thankfully, other changes in the market have been brewing long before COVID-19 entered the picture. With the onslaught of digital transformation and Industry 4.0, enterprises are turning to newer technologies such as Mobile Internet of Things (IoT), cellular-based location techniques like Cell-ID, or more accurate alternatives, such as Cloud Location over Cellular (C-LoC) to help solve the growing challenge of providing end to end supply chain visibility. Innovative players are realizing they can leverage existing, ubiquitous 4G and 5G cellular networks for connecting asset trackers through Mobile IoT. New Mobile IoT standards such as LTE-M and NB-IoT are changing the game on cost, battery life, and extended coverage and have been deployed by carriers around the world. Mobile IoT is the foundation for 5G Massive IoT, which is poised to usher in a new era of hyper-connectivity.

Fleet managers are now able to connect millions of low bandwidth asset trackers to tap into their equipment’s location, whether it’s inside a building or out on the open road. Small, agile devices make for flexible systems, so sensors can be easily affixed to any object needed to be tracked. Using cell towers that already reach 97% of the global population (ITU), there’s no need for new infrastructure. Deployment costs are slashed, and scalability is streamlined. The battery life of a tracker extends from days to years.

Mobile IoT allows actionable intelligence to present itself in the form of various sensor data, including temperature, humidity, shock or other conditions, with the backbone being location. Used in conjunction with asset tracking platforms, configurable alerts and customizable geofences can help make sense of the information in order to act quickly. The point: real-time data enabled by Mobile IoT and cellular-based location provide the best context for fleet managers to rectify problematic situations before they result in business disruption.

Mobile IoT and Fleet Management

Fleet management is evolving to include not only gaining visibility into a vehicle’s location, but even further – into the items on or associated with the vehicle, whether they are scooters or pallets of soda. This encompasses tracking the trailer, the vehicle cab, in addition to the individual items inside the trailer (i.e. hand trucks).

Moreover, fleet tracking doesn’t always mean a vehicle in motion. A fleet of vans stored on an expansive property can rack up hours in labor costs for personnel who are tasked with finding a needle in a haystack. This knowledge is important for automobile manufacturers, car dealers and leasing companies.

Using Mobile IoT and cellular-based location, systems can also be supplemented with cost-effective trackers in areas where many signals aren’t available, such as inside warehouses or covered parking garages.

Fifth Wheel Dolly Mini Case Study

When fifth wheel dollies are no longer needed, drivers for one LTL company often drop them off in a manufacturing/warehouse district, or hook them up to another, second trailer. These dollies are then left susceptible to theft or damage by other drivers. Though it’s difficult for fleet managers to know where an individual dolly is at any given time, they have not seen the ROI in using GPS trackers for this type of equipment. If drivers don’t pay attention to where they drop dollies, or they’re damaged and can’t be pulled, this is typically only discovered later through walk-throughs and manual checks around the truck yard.

Using a Mobile IoT location solution with cellular-based location, the LTL company can now leverage existing mobile infrastructure and lightweight devices for asset tracking, no matter what unplanned lot or district a dolly is left in. Less power consumption and heightened indoor/outdoor coverage leads to simpler scalability and increased efficiency in preventing theft, as well as recovering dollies or other goods after loss.

Mobile IoT is driving down the cost and eliminating the barriers to entry of asset tracking for smaller, individual assets. With millions of new IoT devices coming online rapidly, this technology is proving to have a real impact on fleet managers’ bottom lines. While Mobile IoT can be used in combination with various location solutions, choosing the right method can make or break implementation success.

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About Ed Chao, CEO, Polte

As CEO of Polte, Chao leads the team to position Polte as the premier location technology provider for Mobile IoT. Chao brings 26 years of leadership experience, serving as an executive for companies such as MetroPCS, T-Mobile, Lucent Technologies and with the U.S. Digital Service at the White House.

Chao holds a Master of Business Administration from Columbia University, a Master of Science in electrical engineering from Georgia Tech, and a Bachelor of Science in electrical engineering from Rutgers University.