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China is Huawei limited in the use of AMERICAN suppliers

WASHINGTON/NEW YORK (Reuters) – The Trump administration on Thursday officially added China’s Huawei Technologies Co Ltd to trade on the black immediately adoption of the restrictions which will make it extremely difficult for the telecom giant to do business with AMERICAN companies.

The logo of Huawei is seen on the high-profile high-tech startups, and leaders of the meeting, Viva-Tech,in Paris, France-May 16, 2019. REUTERS/Charles Platiau

The Commerce Department issued a rule, promised on Wednesday, so Huawei and 68 branches in more than two dozen countries on the so-called Entity List, a move that prohibited the company from buying parts and components from American companies without U.S. government approval.

The obtaining of any such approval will not be easy. The U.S. government will review license applications in the framework of a “policy of presumption of denial,” says a message on the Federal Registry.

The order is effective immediately, a Commerce Department spokesman said that, although it is not officially published in the Federal Register until Tuesday.

Huawei, the world’s largest telecommunications equipment maker, did not immediately respond to a request for comment.

The action comes as the two largest economies ratchet up the rates in a battle over what the officials of the V. S. call China’s unfair trade practices.

In a one-two punch, order came a day after President Donald Trump signed an executive order declaring a national emergency and blocking AMERICAN companies from the use of telecommunications equipment made by companies that are national security risk.

The United States believes the Huawei smartphones and network equipment can be used by China to spy on the Americans, allegations the company has repeatedly denied.

The Commerce Department first gave notice on Wednesday that it is adding Huawei to the list.

Huawei is “involved in activities contrary to the national security or foreign policy interests of the United States,” the order says.

As an example, the order cites a criminal case is pending against the company in the federal district court in Brooklyn, New York, over allegations Huawei violated U.S. sanctions against Iran. Huawei has pleaded not guilty in the case.

It notes that the indictment also accuses Huawei of “misleading and obstructive acts.”

Members of Congress and administration officials said the move would make it difficult for Huawei to sell many products due to its dependence on AMERICAN suppliers.

COLLATERAL DAMAGE?

Washington lawyer Douglas Jacobson, a trade expert, said that there would be collateral impact on the US companies that sell to Huawei.

“While the intent is to punish Huawei, eventually, AMERICAN companies will also be punished,” said Jacobson.

Analysts cut price targets on several microchip companies, including Xilinx Inc. Shares of Xilinx closed 7.3 percent, while that of rival chipmaker Qualcomm Inc. fell 4 percent.

The command is given, the likelihood that Commerce’s grant of licenses, so that the sale is negligible, Jacobson said.

Still, the history shows that the government could provide respite. In 2016, Huawei’s smaller competitor ZTE Corp is added to the entity list, about the allegations in the organized an elaborate scheme to hide her re-export of U.S. items to the sanctioned countries.

AMERICAN companies were prohibited from the sale of parts and components to ZTE for about two weeks, before the Ministry of Trade issued a series of notes for a temporary general licenses which allowed the company to continue to do business with AMERICAN suppliers to agreed to a plea deal a year later.

The saga of ZTE. In April 2018, the Commerce Department slapped a ban on American companies selling parts to ZTE after accusing it of breaking an agreement, leading ZTE to cease operations until it struck a new deal last summer.

Reporting by David Shepardson in Washington and Karen Freifeld in New York; Editing by Grant McCool and Peter Cooney

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