BIS Has Approved $100 Billion Worth of Huawei and SMIC Export Licenses

Oct. 26, 2021

According to documentation recently released by a member House Foreign Affairs Committee, between November 9, 2020, and April 20, 2021, the US Bureau of Industry and Security (BIS) approved a combined $100 billion in export licenses for shipments to Huawei and Semiconductor Manufacturing International Corporation (SMIC), two companies blacklisted by the agency under the Trump administration. In response to this release the BIS has stated that if taken at face value these figures may “mislead industry” as they capture statistics relating to “an arbitrary snapshot in time.”

These figures, initially released to the House Foreign Affairs Committee last week after they were requested by Representative Michael McCaul (R-TX), have taken many members of industry by surprise. A reading of the BIS Entity List, found in Supplement No. 4 to Part 744 of the EAR, indicates that the BIS imposes a “presumption of denial” for most Huawei and SMIC export license applications. Huawei has been included on the BIS “Entity List” since May of 2019 while SMIC has been included since December of 2019. With this in mind, an approval rate of roughly 70% to 90%, many believe, simply does not square with the general BIS policy of denial associated with these entities.

All the more surprising, a closer reading of the released licensing statistics show that the BIS has approved 113 licenses for Huawei, roughly 70% of the total license applications received during the period, while it has approved 188 licenses for SMIC or nearly 90% of the total license applications received during the period. Approved Huawei licenses from the period are valued at more than $61 billion USD, while approved SMIC license are valued at more than $41 billion USD.

According to the BIS the released statistics regarding Huawei and SMIC licensing do not reflect pending applications which were set to be denied, the inclusion of which would would have significantly lowered the percentage of approved applications. Additionally, the BIS made clear in its response that applications from this period were reviewed under a licensing policy announced by the Trump administration and continued under the Biden administration which has allowed for a more lenient license review policy for certain exports to Huawei of telecommunication devices below the 5G level, and for exports to SMIC of items that relate to the production of semiconductors at advanced technology nodes above 10 nanometers.

While there appear to be legitimate discussions to be had regarding what has been approved, what has been denied, and what has yet to reach a conclusion one thing appears to be clear, the BIS decision to grant $100 billion in export licenses to Huawei and SMIC, China’s top chip maker, despite both companies being backlisted by the US government shows just how interconnected the US and Chinese economies truly are, especially in the face of an ongoing global chip shortage.

If you have questions regarding export controls or BIS licensing do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.