Last week's tightening of U.S. restrictions on Huawei (see 2008170043) took the semiconductor industry by surprise, and many in the sector worry about short-term supply chain disruptions due to the new measures, said industry officials and experts we canvassed. Many said they think the initial restrictions in May were sufficient, expressing frustration that the Commerce Department's Bureau of Industry and Security didn't seek industry feedback before imposing the new requirements. Though chipmakers are bracing for short-term complications, officials said they're also concerned about the long-term impacts of a U.S. national security policy that seems to continually target U.S. industry, even if indirectly. “We're now encouraging customers in China to move away from U.S. technology and semiconductors,” one semiconductor industry official said. “Why would they in the future use U.S. technology if they’ll be subject to all these rules?” The new rule expanded on a May policy that further restricted non-U.S. companies from selling chips using U.S. technology to Huawei. Officials said semiconductor supply chains will inevitably be impacted, but many remain unsure how broadly the impacts will be felt. The scope of the restrictions will depend on how strictly Commerce Department officials review license applications, which can range from case-by-case reviews to presumptions of denial. Much depends on whether Commerce "is serious about implementing this new rule literally,” said Alen Lin, a technology industry expert and analyst with Fitch Ratings. “If they do that, it does effectively cut off Huawei from any type of semiconductors.” Even though companies are still assessing the impact, industry officials expect many more chipmakers to be affected by the new restrictions than by the measures issued in May. Officials thought those requirements worked in targeting Huawei, which is why some said they were surprised when BIS issued more restrictions last week. “We were caught off guard,” one semiconductor industry official said. “We thought the original May rule was working. The objective seemed to have been achieved.” But Commerce Secretary Wilbur Ross said Huawei was working with third parties to evade the restrictions, necessitating the tougher measures. The US-China Business Council said it's “deeply concerned” about the risk of “overly broad” restrictions resulting from the rule. It could lead to “unintended consequences … that deliver a bonanza of new business to our competitors while doing nothing to improve national security,” USCBC spokesperson Doug Barry said. He said more communication between government and industry would help: “The Trump administration needs to listen carefully to the industry perspective and learn more about their business models.”
Country of origin cases
Qualcomm’s victory before the 9th U.S. Circuit Court of Appeals strengthens the hand of patent holders like Huawei, which could create national security risks, tech industry officials and antitrust attorneys said in interviews. A Qualcomm proponent said the FTC shouldn’t seek an appeal in a case that would put “more bad law on the books against” the agency (see 2008110065).
Q2 smartphone imports to the U.S. increased by double digits sequentially from Q1, amid China's supply chain recovery to pre-COVID-19 levels after the pandemic brought factories to a halt in much of February into March. The quarter-to-quarter increase masked subdued smartphone demand attributable to the decline in consumer spending. Year-over-year smartphone imports fell by double digits in Q2, consistent with IDC reporting a 12.6% decrease in second-quarter U.S. handset shipments.
Six gateway providers complied “within 48 hours” of receiving letters from the FCC and FTC in April and May demanding they cut traffic allowing COVID-19-related scam robocalls originating outside the country into the U.S. (see 2005200053), FCC Chairman Ajit Pai said in letters to Sens. Maggie Hassan, D-N.H., and Tom Carper, D-Del., released Thursday. Hassan and Carper wrote in June urging the FCC, DOJ and IRS to “aggressively” crack down (see 2006260067). The USTelecom Industry Traceback Group confirms Connexum, IntelePeer Cloud Communications, PTGi International Carrier Services, RSCom, SipJoin and VoIP Terminator/BL “continue to be in compliance,” Pai said. “We will continue to monitor these and other gateway providers to stop illegal international robocalls before they reach consumers.” Those efforts “could be one reason that there has been a notable decrease in robocall complaints filed both at the FCC and FTC in recent months,” he said. He said the FTC reports robocall complaints decreased 68% in April 2020 from April 2019, with a 60% drop in complaints in May. Pai noted the senators’ concerns about DOJ’s recent inability to collect more than a token amount of FCC-levied fines against robocallers, saying the commission lacks "authority to force entities to pay the fines levied in a Forfeiture Order. When an entity does not pay, we must refer the case to the Justice Department for collection."
The U.S. Court of Appeals for the D.C. Circuit's 2-1 ruling Friday knocking down two FCC conditions on Charter Communications' buying Time Warner Cable and Bright House Networks didn’t get to the merits (see 2008140018). It nonetheless could have implications for future consumer challenges of regulations, said cable attorneys and appellant the Competitive Enterprise Institute in interviews. Industry and public interest lawyers disagree how the ruling will affect a parallel FCC proceeding on sunsetting Charter/TWC/BHN conditions (see 2007230015).
A key federal appeals court vacated some FCC conditions on Charter Communications' buys of Time Warner Cable and Bright House Networks. Then-FCC Commissioner and now-Chairman Ajit Pai and Commissioner Mike O’Rielly originally voted against the deal curbs. Appellants are several consumers and the Competitive Enterprise Institute.
The FCC and FTC have had "a notable decrease" in robocall complaints in recent months, maybe due to the agencies' work over the spring with DOJ and USTelecom's Industry Traceback Group on COVID-19 robocall scams originating overseas, FCC Chairman Ajit Pai wrote Sens. Maggie Hassan, D-N.H., and Tom Carper, D-Del., in letters dated Aug. 6 and released Thursday. Pai said FTC complaints in April were down 68% from April 2019 numbers, and May numbers were down 60% year over year. He said the FCC Consumer and Governmental Affairs Bureau received 7,600 unwanted call complaints in April 2020 and 9,000 in May 2020, compared with 37,800 over the first three months of the year. He acknowledged it's often difficult to tell if the consumers are receiving specifically COVID-19 pandemic-related scam calls. The letters were in response to the senators urging a crackdown on COVID-19 robocall scams (see 2006260067).
Senate Homeland Security Committee Chairman Ron Johnson, R-Wis., and ranking member Gary Peters, D-Mich., filed the Ensuring Network Security Act Tuesday to expand eligibility for funding to help U.S. communications providers remove Chinese equipment determined to threaten national security. Congress originally established the program in the Secure and Trusted Communications Networks Act (HR-4998). The Ensuring Network Security Act would make providers who have up to 10 million customers eligible for "rip and replace" funding. HR-4998 originally limited the funding to cover companies with up to 2 million customers (see 2003040056). "In our increasingly connected world, it is imperative that 100% of our communications networks are secure, and this bill will help accomplish that," Johnson said in a news release. FCC Commissioners Brendan Carr and Geoffrey Starks, NTCA CEO Shirley Bloomfield and Competitive Carriers Association President Steve Berry praised the measure, in the Johnson release.
The FCC voted 4-1 to cancel a 2016 proposal to fine AT&T $106,425 for E-rate violations because the notice of apparent liability was issued after the one year statute of limitations on the violations, said an order in Wednesday’s Daily Digest (see 1608260037). The original NAL argued AT&T’s failure to charge two Florida school districts the lowest corresponding price was a continuing violation of the rules. Commissioner Jessica Rosenworcel dissented, saying she respected the procedural argument but believes there were merits to the previous FCC’s approach. The 2016 FCC’s stance that some violations should be treated as continuing would lead to more accountability for USF carriers, she said. She also said the date of violations should be pegged to USF disbursements. Commissioner Geoffrey Starks voted “concur” but raised similar concerns: “The Commission should consider how we can best promote timely detection of violations to avoid future problems with the statute of limitations.” Commissioner Mike O’Rielly said the original NAL would have failed on the merits if it hadn’t been canceled. “The previous Commission’s attempt to evade the applicable statute of limitations through its continuing violation theory was offensive to the rule of law and must be thoroughly rejected,” he said. “This NAL was dismissed because it was procedurally flawed," emailed an AT&T spokesperson. "But it was also substantively flawed, and egregiously so, as its core factual and legal claims were simply wrong.”
Some tech merchandise of Chinese origin sent to Mexico for minimal handling and then exported to the U.S. is eligible for tariff treatment under the U.S.-Mexico-Canada Agreement on free trade, said Customs and Border Protection in a ruling Friday. Jose Fierro, an El Paso customs broker, requested the ruling less than a week after USMCA took effect July 1. The broker said a client contracted with a Mexican maquiladora final assembly facility for logistical services, and inquired if USMCA treatment would apply. Workers at the maquiladora facility will provide sorting, picking and packing services on the goods, which will be exported to the U.S. "in the same condition as they were imported into Mexico," Fierro told CBP. The goods include computing products of various sorts and a broad variety of goods, including smart speakers, Bluetooth headphones, smartwatches and fitness trackers.