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Trump administration hits China’s Huawei with the one-two punch

WASHINGTON/NEW YORK (Reuters) – The Trump administration on Wednesday took aim at China’s Huawei Technologies Co Ltd, a prohibition on the company from the purchase of vital AMERICAN technology without special approval and effective blocking of the equipment of the AMERICAN telecom networks, on national security grounds.

FILE PHOTO: The Huawei logo is seen on a bus stop in Mexico City, Mexico February 22, 2019. REUTERS/Daniel Becerril/File Photo

Together, the two movements threaten Huawei’s ability to continue to sell many products because of its dependence on American suppliers, and represents a significant escalation in the government of the V. S. worldwide campaign against the company.

The steps also come at a delicate time in relations between China and the United States as the world’s two largest economies ratchet up the rates in a battle over what the officials of the V. S. call China’s unfair trade practices.

Washington believes that the handsets and network equipment for telecommunications companies made by Huawei could be used by the Chinese state to spy on the Americans.

Huawei, which has repeatedly denied the allegations, said in a statement that “the limit of the Huawei from doing business in the US will not make the U.S. more secure or stronger; instead, this will only lead to a limitation of the V. S. to inferior yet more expensive alternatives, which the US is lagging behind in 5G deployment.”

“In addition, unreasonable restrictions infringing on Huawei’s rights and raise other serious legal problems.”

The ban on AMERICAN suppliers, who appears on a rival Huawei, ZTE Corp. last year, could hit the shares of Huawei’s biggest AMERICAN suppliers, including chipmakers Qualcomm Inc. and Broadcom Inc.

In the first action held on Wednesday, President Donald Trump, signed a long-awaited 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 order invoked the International Emergency Economic Powers Act, which gives the president the authority to regulate the trade in response to a national emergency, which poses a threat to the United States. He’s referring to the Commerce Department, together with other public authorities, for the preparation of an enforcement plan in October.

Members of Congress said that Trump’s command was clearly aimed at Chinese companies such as Huawei, which generated $93 million in sales last year and is seen as a national champion in China.

“China’ s main export is espionage, and the distinction between the Chinese Communist y and Chinese private-sector companies such as Huawei is imaginary,” the Republican Senator Ben Sasse said.

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THE ENTITY LIST

Soon after the White House announced the order was signed, the Ministry of Commerce said it had added Huawei and 70 branches of the so-called Entity List in a move that doesn’t allow the telecom giant from buying parts and components from US companies without US government approval.

The officials of the V. S. told Reuters the decision would make it difficult, if not impossible, for Huawei, the largest telecommunications equipment producer in the world, the sale of certain products because of its dependence on AMERICAN suppliers. It shall take effect in the coming days.

Trade Minister Wilbur Ross said in a statement Trump behind the decision that “Us technology is used by foreign entities in a way that potentially undermine U.S. national security or foreign policy interests.”

With the Huawei the Entity List of the AMERICAN suppliers will need to apply for licenses to provide the Chinese company with everything under the US export control regime. The obtaining of such permits will be difficult because they will have to transfer items that are not harmful for AMERICAN national security, said John Larkin, a former export control officer in Beijing for the Commerce Department.

The United States in January unsealed a 13-count indictment against Huawei, accusing the company and its chief financial officer, of conspiracy to defraud global financial institutions by a misrepresentation of Huawei’s relationship with a suspected front company, which is active in Iran.

The indictment was unsealed a month after CFO Meng Wanzhou was arrested in Canada on a U.S. arrest warrant for her role in the alleged fraud. Mix, who maintains her innocence, is fighting the extradition.

5G NETWORKS

Reuters reported Tuesday that Trump was expected to sign his long-awaited executive order this week. The order does not specifically name a country or a company, but U.S. officials have previously labeled Huawei a “threat”.

The United States has been actively pushing other countries not to use the Chinese company’s equipment in the next-generation 5G networks, which it calls “unreliable.” In August, Trump signed a bill to exclude the U.S. government from the use of equipment from Huawei and other Chinese provider, ZTE Corp.

ZTE is added to the Department of Commerce Entity List in March 2016 more than the allegations in the organized an elaborate scheme to hide her re-export of U.S. items to the sanctioned countries in violation of US law.

The AMERICAN President Donald Trump speaks to employees during a visit to the Cameron LNG (Liquid Natural Gas) Export Facility in Hackberry, Louisiana, united states, May 14, 2019. REUTERS/Leah Millis

The restrictions prevent vendors from providing ZTE with AMERICAN equipment, possible freeze of the company’s supply chain, but the restrictions were suspended in a series of temporary respite, allowing the company to maintain ties with AMERICAN suppliers to agreed to a plea deal a year later.

The status of Huawei and ZTE has taken on a new urgency as the U.S. wireless carriers to roll out 5G networks.

While the big companies have already cut ties with Huawei, small, rural carriers continue to rely on both Huawei and ZTE, switches and other equipment, because they tend to be cheaper. Trump’s order applies to future purchases and does not apply to existing hardware, government officials said Wednesday.

Reporting by David Shepardson; Editing by Tom Brown, Chris Sanders, and Sonya Hepinstall

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