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Focus on Regulation

BIS Expands Foreign-Produced Direct Product Rule With Regard to Huawei

The Commerce Department’s Bureau of Industry and Security has announced an Interim Final Rule amending the Export Administration Regulation’s General Prohibition Three, the foreign-produced direct product rule.

According to the accompanying press release, the rule change makes the following foreign-produced items subject to the EAR:

  • Items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and
  •  Items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List (e.g., HiSilicon), that are the direct product of certain semiconductor manufacturing equipment located outside the United States.  Such foreign-produced items will require a license when there is knowledge (or reason to know) that they are destined for reexport, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.

The interim final rule is effective as of 15 May 2020.  Comments must be submitted by 14 July 2020.