This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Freshfields Risk & Compliance

| 3 minutes read
Reposted from Freshfields Technology Quotient

UK bans Huawei, starting with 5G, and Europe may follow

On July 14, 2020, the UK’s National Cyber Security Centre (NCSC) issued guidance that bans Huawei from involvement in future 5G telecommunications networks and phases out Huawei equipment from existing 5G networks by 2027. This guidance revises an earlier NCSC decision from January 2020 in which the NCSC had stipulated that “high risk vendors” like Huawei could have a limited role in the UK’s 5G networks.

The NCSC guidance most immediately requires UK network operators to:

  1. cease procurement and deployment of 5G equipment from Huawei by the end of 2020;
  2. cease procurement and deployment of fibre to the premises (FTTP) access equipment by a date that has yet to be established, but will likely be no longer than two years from the publication of the guidance;
  3. remove all Huawei equipment from existing 5G networks by 2027; and
  4. procure enough spare parts to maintain equipment for its expected lifetime.

The guidance presages potential further analysis of UK 3G and 4G mobile networks.

What changed in the UK? Why is this happening now?

The UK government cites growing concerns about the ability to guarantee the security of Huawei equipment as the main reason for the revised guidance. The timing and decision to curtail Huawei’s involvement in UK networks – after over a year of US restrictions on Huawei – appear to be driven largely by the May 15, 2020 revisions to the United States’ Foreign Direct Product Rule on Huawei and its related entities.

  1. Huawei Entity Listing: in 2019, the US Department of Commerce Bureau of Industry and Security (BIS) added Huawei Technologies Co., Ltd. and 114 of its non-US affiliates to the BIS Entity List, thereby restricting exporters from exporting, re-exporting, or transferring US-origin items, technology, or software to these listed entities, as well as non-US items that contain a greater than de minimis amount of US-controlled content.
  2. Revision to the Foreign Direct Product Rule (FDPR): on May 15, 2020, BIS updated the FDPR to essentially require a license for exports to Huawei of foreign-made custom chipsets or chipsets that are the “direct product” of certain US technologies and software. This expanded the scope of items that are subject to export controls in the Export Administration Regulations (EAR) because it covers certain items that contain less than the EAR’s threshold for de minimis amounts of US controlled content.
  3. Termination of the Temporary General License (TGL): also on May 15, 2020, the US Department of Commerce stated that it is possible that the TGL for the 115 Huawei entities will no longer be extended after August 13, 2020, and further warned that companies and persons relying on the TGL should prepare for the eventuality that the TGL will be eliminated.

In sum, the increasingly restrictive US export controls on Huawei – and in particular the recent change to the FDPR – appear to be succeeding in heightening the pressure on Huawei’s non-US supply chain and other countries to limit Huawei’s presence in Western communications networks. As the NCSC noted in its July guidance, the revision to the FDPR will cause Huawei to perform a major reconfiguration of its supply chain, given that Huawei will no longer be able to rely on certain semiconductors and there are few or no alternatives for these goods. Accordingly, the NCSC expressed concern about the security of Huawei equipment in the future.

Other countries in Europe are also taking note. It has been reported that while Belgium and France will not ban Huawei from its 5G telecommunications networks for now, there is increasing political pressure in Germany and ongoing discussions in Italy, Poland, and other EU member states to restrict Huawei’s role in future 5G networks.

Increased risk of Chinese retaliation

These decisions by the US and UK governments increase the risk that China will take action against companies for complying with US and UK law.

For example, in an attempt to deter foreign companies from complying with US law, China has been working on rolling out measures that may be used as retaliation against foreign companies. This includes placing foreign companies on its Unreliable Entities List, which would subject listed companies to unspecified sanctions. There has also been a continuing apprehension that China’s competition authority, the State Administration for Market Regulation (SAMR), could target deals that require approval in retaliation for restrictions imposed by the United States on Chinese access to US technology, although in practice SAMR still needs to build a case for the potential harm on competition in China to justify any decision to intervene in a particular transaction.

Furthermore, on May 18, 2020, immediately following the change to the FDPR, the State Council of China officially released the 'Opinion on Improving the Socialist Market Economy in the New Era to Promote the High-quality Development of the Economy'. In this policy document, it is reiterated that China will continue to build its national security review, antitrust, Unreliable Entities List, and the national technological security management list.

While the Chinese government has not yet placed any companies on the Unreliable Entities List, state-controlled media has, in response to the latest US action, suggested that China could respond by imposing restrictions or launching investigations into major US corporations, as well as suspending purchases of US commercial aircraft.


telecommunications, europe, americas, risk, regulation, cyber security, asia