Almost two years ago, the Trump administration issued an executive order banning Chinese telecommunications companies from doing business in the U.S., which ultimately included Huawei and its smartphone business. Now a new administration is in place—and it’s expanding that ban.
With the changeover in the Presidental administrations, it was unclear if the Huawei ban would continue. Now the Biden administration issued an executive order that affirms the previous order and expands it to cover more Chinese tech and defense companies, bringing the total to 59. But it made several changes to the previous executive order—both to strengthen and expand the ban.
The first part of strengthening the ban involves moving responsibility for picking the companies on the list from the Pentagon to the Department of Treasury. The previous executive order had been successfully challenged in court because it didn’t lay out the reasons for the ban clearly enough. The Treasury Department has experience with sanctions, which could help bolster efforts to survive court challenges. As the Executive Order states:
This E.O. will amend E.O. 13959 by creating a sustainable and strengthened framework for imposing prohibitions on investments in Chinese defense and surveillance technology firms. The E.O. prohibits United States persons from engaging in the purchase or sale of any publicly traded securities of any person listed in the Annex to the E.O. or determined by the Secretary of the Treasury, in consultation with the Secretary of State, and, as the Secretary of the Treasury deems appropriate, the Secretary of Defense:
- To operate or have operated in the defense and related materiel sector or the surveillance technology sector of the economy of the PRC; or
- To own or control, or to be owned or controlled by, directly or indirectly, a person who operates or has operated in any sector described above, or a person who is listed in the Annex to this E.O. or who has otherwise been determined to be subject to the prohibitions in this E.O.
As spelled out in the Executive Order “quoted above” individuals and companies can’t invest in the listed companies either, which keeps Huawei in the same boat it’s in now. Even selling off parts of the company to an American or American company wouldn’t work—which is why Huawei sold off Honor to a newly formed company that is majority-owned by the China state. It also means Huawei will have to continue with its plan for a Google-Free version of Android, dubbed HarmonyOS.
Of interest are the companies not named in the updated Executive Order—the parent company that now owns Honor, Xiaomi, and ZTE. The ban on Xiaomi lifted earlier this year and ZTE simply goes unmentioned. Of the 59 companies mentioned, most are in aerospace decisions, with Huawei and Panda Electronics being among the few exceptions. Huawei does have enterprise contracts and is heavily invested in 5G technology though, so its inclusion does follow a certain logic.
The New York Times, however, reports that Administration Officials indicated the list of banned companies is likely to grow. If and when that does, we’ll let you know.
Source: White House