Nearly two years ago, the Trump administration issued an executive order banning Chinese telecommunications companies from doing business in the US, eventually including Huawei and its smartphone operations. Now there̵
With the switch in presidential administrations, it was unclear whether the Huawei ban would go through. Now, the Biden administration has issued an executive order confirming the previous order and extending it to more Chinese technology and defense companies, bringing the total to 59. But it made several changes to the previous executive order, both to strengthen and extend the ban.
The first part of strengthening the ban involves moving the responsibility for choosing the companies on the list from the Pentagon to the Treasury Department. The previous executive order had been successfully challenged in court for not explaining clearly enough the reasons for the ban. The Treasury Department has experience with sanctions, which could help support efforts to survive judicial challenges. As the implementing decree states:
This EO will amend EO 13959 by creating a sustainable and reinforced framework for imposing investment bans on Chinese defense and surveillance technology companies. The EO prohibits persons of the United States from engaging in the purchase or sale of publicly traded securities of any person listed in the Schedule to the EO or determined by the Secretary of the Treasury in consultation with the Secretary of State Affairs, and, as the Secretary of the Treasury sees fit, the Secretary of Defense states:
- to be or have been active in the defense and related equipment or surveillance technology sector of the economy of the PRC; or
- Own, directly or indirectly, own or control, or are owned or controlled by, any person who is or has been active in any of the industries described above, or any person listed in the Schedule to this EO or whose otherwise determined to be subject to the prohibitions in this EO
As explained in the Executive Order “cited above”, individuals and companies also cannot invest in the publicly traded companies, leaving Huawei in the same boat it is in now. Even selling parts of the business to an American or American company wouldn’t work. As a result, Huawei has sold Honor to a newly founded company majority-owned by the Chinese state. It also means Huawei must go ahead with its plan for a Google-free version of Android called HarmonyOS.
Of note are the companies not mentioned in the updated Executive Order – the parent company that now owns Honor, Xiaomi and ZTE. The ban on Xiaomi was lifted earlier this year and ZTE just goes unmentioned. Of the 59 companies listed, the most decisions are made in aerospace, with Huawei and Panda Electronics being the few exceptions. Huawei does have business contracts and is heavily invested in 5G technology, so its inclusion follows a certain logic.
However, the New York Times reports that government officials have indicated that the list of banned companies is likely to grow. If and when that’s the case, we’ll let you know.
Source: White House