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Exclusive: White House considering new years executive order to bar Huawei, ZTE purchases

WASHINGTON (Reuters) – President Donald Trump is considering an executive order in the new year to declare a national emergency that would bar AMERICAN companies from the use of telecommunications equipment made by chinese Huawei and ZTE, three sources familiar with the situation told Reuters.

FILE PHOTO: A man walks past a sign of Huawei at the CES (Consumer Electronics Show) Asia 2018 in Shanghai, China, June 14, 2018. REUTERS/Aly Song

It would be the latest step by the Trump administration to cut Huawei Technologies Cos Ltd [HWT.UL] and ZTE Corp., two of China’s largest network equipment companies, the AMERICAN market. The United States claims that the two companies work on behalf of the Chinese government, and that their equipment can be used to spy on the Americans.

The executive order that already qualifies for more than eight months, can be issued in January and would direct the Commerce Department to block U.S. companies from buying equipment from foreign telecoms vendors who are a major national security risks, the sources of the telecom industry and the administration said.

But the sequence is unlikely that the name Huawei or ZTE, a source said, is the expectation that the Trade officials would interpret it as permission to limit the spread of the equipment of the two companies. The sources said the text of the order is not yet completed.

The executive order, to appeal to the International Emergency Economic Powers Act, a law that gives the president the authority to regulate the trade in response to a national emergency, which poses a threat to the United States.

The issue has a new urgency as the U.S., wireless carriers are looking for partners as they prepare to take the next generation of 5G wireless networks.

The order follows the passage of a defense policy bill in August ruled out that the U.S. government itself from using Huawei and ZTE equipment.

Huawei and ZTE not return requests for comment. Both in the past have denied allegations of their products used to spy. The White House also does not return a request for comment.

The Wall Street Journal first reported in early May that the order is in the treatment, but it was never issued.

HIT TO NATIONWIDE NETWORKS

Rural operators in the United States are one of the largest customers of Huawei and ZTE, and the fear of the executive order would also require them to rip out existing Chinese-made equipment, without compensation. Industry officials are divided on the question whether the administration can force operators to do that.

While the big AMERICAN companies have ties with Huawei, in particular, small, rural carriers have used on Huawei and ZTE, switches and other equipment, because they tend to be less expensive.

The company is so central to small carriers that William Levy, vice president for sales of Huawei Tech usa, is the board of directors of the Rural Wireless Association.

The RWA represents carriers with less than 100,000 subscribers. He estimates that 25 percent of the members had Huawei or ZTE equipment in their networks, it said in a filing to the Federal Communications Commission earlier this month.

The RWA is concerned that an executive order could force its members to remove ZTE and Huawei equipment and also bar future purchases, said Caressa Bennet, RWA general counsel.

It costs $800 million to $ 1 billion for all RWA members to replace their Huawei and ZTE equipment, Bennett said.

Separately, the FCC in April granted initial approval to a regulation that bars giving federal funding to help pay for the telecommunications infrastructure to companies for the purchase of equipment of the companies deemed to be threats to AMERICAN national security, which analysts have said is aimed at Huawei and ZTE.

The FCC is also considering requiring carriers to remove and replace equipment in companies considered to be a national security risk.

FILE PHOTO of logo of the chinese ZTE Corp is seen on the building of ZTE Beijing research and development center in Beijing, China, June 13, 2018. REUTERS/Jason Lee

In March, FCC Chairman Ajit Pai said: “the hidden ‘back doors’ in our networks, routers, switches, and virtually any other form of telecommunications equipment – may be an avenue for hostile governments to inject viruses, denial-of-service attacks, stealing data, and more.”

In the December filing, the Bond Communications in Alabama estimated that it would cost $7 million to $13 million to replace the Chinese-made equipment, while Sagebrush in Montana said replacement would cost $57 million and take two years.

Wormwood has noted that Huawei products are significantly cheaper. When looking for bids in 2010 for her network, find out the cost of Ericsson equipment will be almost four times the cost of Huawei.

Reporting by Diane Bartz and David Shepardson; Editing by Chris Sanders and Leslie Adler

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