U.S. Rule Limiting Huawei Purchases to Be Released Wednesday

(Bloomberg) --

The Trump administration plans to release an interim rule on Wednesday that details a ban on federal agencies buying video surveillance and telecommunications products from China’s Huawei Technologies Co., according to senior administration officials.

The rule, which will go into effect next week, was required by Congress as part of the 2019 National Defense Authorization Act. It would bar any executive agency, government contractor or company that receives a government loan from using Huawei equipment.

There will be a comment period on the interim final rule. The rule will allow individual federal agencies to grant some waivers where security is not at issue.

While the rule was expected, it comes as tensions between the U.S. and China surge over trade. The Trump administration formally labeled China a currency manipulator late Monday in a tit-for-tat escalation of the dispute after Beijing let its currency weaken and ended purchases of American agricultural products in response to new tariffs.

Huawei sued in March after President Donald Trump signed the annual defense policy bill with the provision prohibiting the company from supplying government agencies. The company argued it’s unconstitutional to single out a person or group for penalty without a trial. The rule would enact the provisions of the law blocking Huawei from government business.

In addition to Huawei, the law also bans federal agencies from using certain products made by other Chinese firms, including Hytera Communications Corp., ZTE Corp., Hangzhou Hikvision Digital Technology Co. and Dahua Technology Co.

“The administration has a strong commitment to defending our nation from foreign adversaries, and will fully comply with Congress on the implementation of the prohibition of Chinese telecom and video surveillance equipment, including Huawei equipment,” said Office and Management and Budget spokesman Jacob Wood.

The Trump administration has said Huawei, China’s largest technology company, represents a national security threat and has been pressing allies to exclude the company from new 5G telecommunications networks. In May, the Commerce Department moved to blacklist Huawei, cutting it off from U.S. suppliers and limiting American telecoms’ access to buying equipment from the Shenzhen-based company.

Those limits were eased after Trump met with Chinese President Xi Jinping in June on the sidelines of the Group of 20 summit in Osaka, Japan, and agreed to pause the trade war between their countries.

Since then, trade tensions have flared anew, with Trump threatening a new round of tariffs and China weakening the yuan in a move the U.S. has called currency manipulation.

Next year, the second part of the defense authorization law will kick in. That part restricts the government from doing business with a company that also does business with a covered telecommunication service.

To contact the reporter on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Joshua Gallu, Larry Liebert

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