To our knowledge, this is either the first or one of the very few times that a government agency has prevented the Huawei ban from growing in breadth since the ban began in May of last year.
The Commerce proposal would have made it more difficult for other countries to sell products to Huawei that contain a certain percentage of US-based parts. At the moment, if 25% or more of a product is made up of US parts, companies cannot legally sell it to Huawei. The Commerce Department wanted to make the 25% rule into 10%, which would likely have a big effect on China’s trade.
The proposal would have also instituted a new rule that would have included the same 10% limit on non-technical goods.
According to sources speaking with Reuters, the US Department of Defense felt that these restrictions were going too far and the proposal would have too much of a negative effect on both US and foreign businesses. The increased restrictions would also likely force Huawei to source more goods from abroad.
Although this might seem as if the Defense Department thinks the current state of the Huawei ban is restrictive enough, that might not necessarily be the case. For example, it could tell the Commerce Department to move forward with the plan but instead of using the 10% figure it should instead use 11%.
Still, people who think the Huawei ban is currently too restrictive or restrictive enough will likely welcome this news. It also is clearly good news for Huawei, although not good enough news to break out any champagne bottles quite yet.