By: Danielle Hatch
There has been chatter that the Department of Commerce will be reducing the US-made content (“de minimis”) amount required for US reexports to be licensed to China. The change is said to be an attempt to squeeze Huawei even more past the addition of the Entity List last year. Currently, if you are exporting a product to China it is not subject to the Export Administration Regulations (EAR) if it contains 25% or less US origin “controlled content,” unless the product is controlled for national security reasons and directly produced from US-origin software or technology.
The new rule would change the current 25% threshold to 10% which means a lot more items would be subject to the EAR. In addition, the Department of Commerce would add a term “direct product,” which would make any foreign product made using US technology or software it would be prohibited from being exported to Huawei.
A letter from a group of trade associations was sent to Commerce Secretary Wilbur Ross expressing their concerns for how the policy change could negatively impact exporters. “Creating a special rule for one set of targeted entities sets a dangerous precedent for future rules, while also increasing the compliance risk for U.S. exporters, big and small,” the trade associations warned. “The proposed rules under consideration could negatively impact a wide range of commercial transactions involving items that are not sensitive for any national security reason.”