To Explain The Huawei Iran Sanctions Story – Yes, US Law Applies

That the Chief Financial Officer of Huawei, a Chinese company, has been arrested in Canada over issues of breaking American law might seem a little odd. Seriously? How can someone in a Chinese company in China break US law? But I have to tell you – and this is from direct personal experience, I’ve been there and done this – US law really does apply. Assuming, that is, that what we’re told abut the story so far is correct.

Essentially, when you buy certain US products you agree that you’ll not then send them on to certain other people. Break that promise and that’s that, you’ve broken US law. There’s absolutely no need to buy the American equipment of course, but if you do then that’s what you’re signing up to. You can sell it to these people, those over there, but here’s our little list of those you cannot pass it on to. This is also a strict liability thing. If they end up with people on the little list who cannot have it then that’s that. You promised, you didn’t carry out that promise, we’ll have you thank you very much.

Now, of course, over and above that we get all forms of national security and national importance over rides but that is indeed the basic set up.

Whether Meng Wanzhou had anything to do with it I’ve no idea. This is to explain the background here, nothing else.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The arrest of a top Huawei executive has roiled the business world and threatens to derail the tenuous trade truce between the United States and China. Meng Wanzhou, the Chinese tech company’s chief financial officer, was detained in Vancouver on December 1 at the request of US authorities. [/perfectpullquote]

So, what’s the background here?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Huawei Technologies Co Ltd’s chief financial officer faces U.S. accusations that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions, a Canadian prosecutor said on Friday, arguing against giving her bail while she awaits extradition. The case against Meng Wanzhou, who is also the daughter of the founder of Huawei, stems from a 2013 Reuters report about the company’s close ties to Hong Kong-based Skycom Tech Co Ltd, which attempted to sell U.S. equipment to Iran despite U.S. and European Union bans, the prosecutor told a Vancouver court. [/perfectpullquote]

OK, anything else?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The U.S. alleges that Huawei used a Hong Kong shell company to sell equipment in Iran in violation of U.S. sanctions. It also says that Meng and Huawei misled American banks about its business dealings in Iran.[/perfectpullquote]

Forget the banks, that’s not my point here.

So, if you buy stuff in the US that you can buy at Walmart then that’s pretty much it. Anything available retail doesn’t have any special export licence requirements to it. On the obvious grounds that who the hell is going to try and control exports from hundreds of thousands of retail stores? Once you move up to technology that can only be bought wholesale then four different regimes apply. No regime, just sell it to whoever and have fun. Then Commerce, State and Jeepers, You Want To Sell To Who?

All of this is independent of actual sanctions, in the sense that no one is allowed to deal with North Korea at all. This is the normal export regime for technology. Commerce takes a few weeks to get and really is more about informing the government of what you’re doing. State is more intense. Here they want to know who is buying, why they’re buying, they go have a chat with the government of the place where the buyer is and so on. I did this a few times with chips for satellites and rockets in Russia. Radiation hardened chips which can withstand the rigours of the space environment. I said they would go into this rocket here to go to the ISS. If they did then great. If they didn’t then I would go to jail. Didn’t matter why, I would.

Fortunately that rocket that went up with the Pizza Hut logo on it contained my chips.

Above that is real, proper, technology. There they go around asking all allied governments whether this shipment should be allowed to this customer and so on. And anyone has a veto. Did this with a computer to a Russian helicopter factory once. If it hadn’t gone there, if it had gone elsewhere, then my jail time would have been 20 years. Strict liability, doesn’t matter why it was diverted nor by whom.

The importance of all of these being that at some point one single named individual has to take personal responsibility on the paperwork. That’s the crucial point. Diversion means that person gets dinged – as also do the people who aided them.

Which is our background explanation here. Sure, she’s Chinese, working for a Chinese company. But in order to get hold of that telecoms equipment that is being talked about one specific individual, somewhere, signed a piece of paper promising that it wouldn’t go to this list of people the US didn’t want it to go to. It’s that, and that only, which puts the whole story under US law.

No, still no idea who is guilty here or even whether anyone is. But just so you understand the background here. Someone promised this kit wouldn’t go to Iran, someone promised the US government it wouldn’t, it did, and Uncle Sam is pissed about that.