HUAWEI in hot water with the Feds for possible export violations of US tech to Iran, North Korea

The chief executive of HUAWEI’s consumer group Richard Yu Chengdong recently revealed that the Chinese smartphone maker had ambitions to surpass both Samsung and Apple within the next five years, establishing themselves as the leading smartphone company in the world. These lofty plans are contingent on a number of factors, and one of these is their success in the US market. Unfortunately for HUAWEI, they’ve encountered a number of obstacles inhibiting their becoming a household name in the states, and this most recent development might turn out to be the greatest obstacle to date. The United States Department of Commerce has demanded that the company turn over all information regarding the possible export of American tech to Cuba, Iran, North Korea, the Sudan, and Syria.

The Commerce Department is also looking into the possibility of HUAWEI committing export violations through any front or shell companies. Although HUAWEI has not formally been accused of any wrongdoing, this investigation is holding a serious microscope up to the company to determine whether the Shenzhen-based smartphone maker broke US export controls.

Paul Haswell of the international law firm Pinsent Masons believes this could a crucial moment for HUAWEI. “Presumably, the subpoena is the first step before more serious action by the US. It’s a final chance for HUAWEI to confess to any wrongdoing before such action is taken,” said Haswell. “HUAWEI needs to react quickly and decisively. It’s possible to breach a restriction without fully realising its ambit and consequences.”

So far there does not appear to be any immediate evidence of illegal activity on the part of HUAWEI, but this development echoes with a previous debacle in March during which the US discovered ZTE had broken export controls with Iran. The fallout from this scandal resulted in the company incurring serious export restrictions (which were later lifted), and three of ZTE’s senior directors had to leave the company.

Indeed, these two investigations are more than casually linked. During their investigation into ZTE, the US government learned that the company was modeling their business efforts after a larger rival company that matched HUAWEI’s description. If HUAWEI is discovered to have broken export controls, the consequences could be rather sprawling. As the New York Times puts it:

Any major United States step to block the sales of American tech equipment to HUAWEI would have major implications for telecom networks across the world. Many of HUAWEI’s products use American components or work with American technology.

“HUAWEI is committed to complying with the applicable laws and regulations in the markets where it operates,” said the company in a statement. “[We adhere to] a strict code of conduct, rigorous training and detailed policies relating to export control compliance, and actively cooperates with the relevant government agencies.”

What do you think of this investigation into HUAWEI’s trade practices? It’s important to note that this is currently administrative subpoena, meaning this is not yet a criminal investigation. Let us know how you think this will pan out in the comments below!