The Trump administration said Friday it will block tech giant Huawei's use of American software in overseas manufacturing, closing a loophole that the Chinese manufacturer had relied on to circumvent U.S. sanctions.
The Commerce Department's Bureau of Industry and Security is revising its foreign-produced direct product rule and the Entity List of foreign companies subject to restrictions in the U.S. to "narrowly and strategically" target Huawei’s acquisition of semiconductors that are the direct product of U.S. software.
"There has been a very highly technical loophole through which Huawei has been able to use U.S. technology with foreign fabrication producers," Commerce Secretary Wilbur Ross told FOX Business' Maria Bartiromo on Friday. "This first rule about foreign direct product is a very highly tailored thing to try to correct that loophole. That will have a very powerful impact. We never intended that loophole to be there."
The policy revision comes amid rising tension between Washington and Beijing since the COVID-19 pandemic -- first identified in Wuhan, China -- spread worldwide, infecting 4.4 million people and killing more than 302,000.
President Trump's efforts to penalize China for its initial handling of the outbreak have prompted speculation that an initial trade deal with the U.S. might be jeopardized, and China has indicated it would retaliate for U.S. actions that hurt Huawei, one of its biggest companies.
Beijing is likely to restrict or investigate U.S. companies such as Qualcomm and Apple and suspend purchases of Boeing airplanes, said Hu Xijin, editor-in-chief of the Global Times, a publication with ties to China's ruling Communist Party.
U.S. regulators and lawmakers have warned for years that reliance on Huawei products, particularly in upgraded 5G wireless technology, poses a national security risk.
The Trump administration signed an executive order in 2019 banning all U.S. companies from using Huawei equipment. A string of 90-day exemptions, however, allowed the employment of Huawei products to provide telecommunications services in rural America. Another one was granted on Friday.
"We've made many extensions to make sure rural telecoms have plenty of time in order to wean themselves from the Huawei equipment," Ross said.
"Now that we've given them yet another extension, we want them to make clear to us" what they're doing to achieve that, he added.