By Reid Whitten (Los Angeles) , Julien Blanquart (Los Angeles) and Claire Le Tollec (Los Angeles)

Sheppard Mullin Richter & Hampton
On Monday, February 13, 2023, the US government will officially issue a stricter policy of denial
for providing lower-tech items to Huawei.
Technological containment continues as the Netherlands and Japan move to impose US-style
restrictions on semiconductor exports to China.

1. Additional US restrictions on foreign suppliers to Huawei
   Huawei is prohibited from receiving US-origin items because it is designated on the US Entity
   List. Further, because Huawei is designated with a Footnote 1 (FN 1), non-US items that are the
   Foreign Direct Product of US-origin technology and software may not be exported, reexported,
   or transferred to Huawei without a license from the US Department of Commerce, Bureau of
   Industry and Security (BIS).
   Current US licensing policy for Foreign Direct Product Rule (FDPR) products is to deny the
   provision of such products to Huawei if those products could be used to support the
   development or production of telecom systems, equipment, and devices below, at, or above
   the 5G level. A new policy will go into effect next week (and may have informally been in effect
   for some months now) that will lower that bar and restrict that position.
   Under the new policy, it is likely that BIS will deny applications to export, reexport, or transfer
   items for use in or with products operating below the 5G level to Huawei—including 4G, Wi-Fi 6
   and 7, artificial intelligence, and high-performance computing and cloud items. That policy may
   also be applied to other FN1 and FN4 designated entities.
   The formal introduction of this new licensing policy is not entirely surprising for those in the
   industry that have faced challenges in obtaining export licenses for the past months, and even
   years. BIS has already denied—or allowed to sit unprocessed for months—applications related
   to lower-tech items including 4G-only chips and 5Ghz Wi-Fi-only chips.
   However, the new policy may even go further and deny a license for any export of FDPR
   products to Huawei. There are even reports that BIS may revoke previous licenses granted for
   exports to Huawei.
2. EU and Japan joins the efforts
   As the United States imposed further restrictions back in October, the Biden Administration
   began pushing US allied countries to implement similar controls. That effort has resulted in
   both the Netherlands and Japan reaching an agreement with the US to impose further

restrictions on the export of semiconductors and related technology and manufacturing
equipment to China.
Reports indicate that the Biden administration is not yet announcing precise measures or
details of the agreement. However, as mentioned in our blog article here, the Netherlands will
likely impose similar restrictions to the United States, though likely without any of the
extraterritorial application that is a hallmark of US regulations released in October 2022, which
we discussed here. If that is the case, the Netherlands would be the first Member State in the
European Union (EU) to align with US measures on semiconductors, which may lead to further
EU-wide restrictions on the export of semiconductors to China. For the moment, the lack of EU
action has left some reportedly concerned that the bloc is vulnerable to retaliation from China
and that this agreement has made the bloc look weak in its relationship with the United States.
Japan, the Netherlands, and the United States declined to comment further on the content of
the agreement and the new controls to be implemented by Japan and the Netherlands.
However, the Dutch government has already forbidden sales of some of the country’s most
advanced semiconductor machinery, known as extreme ultraviolet (EUV) lithography systems,
to China. We expect further controls on the chips themselves, as well as related technology.
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