From: / Will Leahy, Manager, China Policy
To: / Asia Task Force, China AmChams
I) House Resolution Calls for CFIUS to Block 3Com Acquisition
II) 3Com SEC Filing Attempts to Allay National Security Concerns
III) Justice Department Launches New Export Control Enforcement Initiative
I) House Resolution Calls for CFIUS to Block 3Com Acquisition
Members of the House of Representatives introduced a resolution (H.Res 730) yesterday calling on the Committee on Foreign Investment in the United States (CFIUS) to block the acquisition of a minority interest in 3Com by Huawei Technologies.
The resolution, which is sponsored by Reps. Ileana Ros-Lehtinen (R-FL), Thaddeus McCotter (R-AL), Peter Hoekstra (R-MI), Nancy Boyda (D-KS), Dan Burton (R-IN), John Culberson (R-TX), Dana Rohrbacher (R-CA), and Ken Calvert (R-CA), and was referred to the Committees on Financial Services, Foreign Affairs, and Energy and Commerce, states that:
  • “the preponderance of publicly available evidence clearly suggests that as currently structured, the proposed transaction involving Huawei threatens the national security of the United States and should not be approved by the Committee on Foreign Investment in the United States.”
Several other members of Congress have sent letters to Treasury Secretary Paulson in recent days expressing concern over the transaction.
II) 3Com SEC Filing Attempts to Allay National Security Concerns
In a filing earlier today with the Securities and Exchange Commission, 3Com laid out the terms of the deal. Huawei will purchase a 16.5 percent stake in 3Com, with the potential to raise its stake by another 5 percent. Bain Capital will purchase the remaining 83.5 percent of 3Com’s voting shares.
In addition, the filing included a fact sheet addressing potential national security concerns which stated that:
  • “Huawei will not have any access to sensitive U.S.-origin technology or U.S. Government sales as a result of this transaction. All of 3Com’s sales to the U.S. Government are made through resellers or integrators; 3Com does not contract with the Government directly.
  • All of 3Com’s sales are of commercial-grade products. All are widely available, off-the-shelf products. There are no products specially designed for the U.S. Government. There are no classified contracts or facility clearances.”
The filing goes on to state that:
  • “3Com maintains effective internal IP control and export compliance programs to prevent unauthorized transfers of controlled technology. 3Com’s commitment to these controls runs from the chief executive and throughout the company. It has a seasoned team of global compliance experts.
  • 3Com maintains multiple screening processes for customers, products and data transfers, including an automated screening program integrated with its order management system. Its products and technology are classified and tracked consistent with applicable laws and regulations. It conducts regular training and auditing to ensure security. Bain Capital is committed to maintaining these strong compliance and security programs.”
On October 4, Bain Capital announced its intention to voluntarily submit a notice regarding the transaction to the CFIUS process.
III) Justice Department Launches New Export Control Enforcement Initiative
The Department of Justice announced earlier today a new interagency effort to step up enforcement of U.S. export control laws. The National Counterproliferation Initiative has been launched in order to “combat the growing national security threat posed by illegal exports of restricted U.S. military and dual-use technology to foreign nations and terrorist organizations.” The DOJ announcement noted that China and Iran “pose particular export control concerns.”
This new program, coupled with imminent action by the President to sign into law a significant increase in penalties for violations of the Export Administration Regulations, augurs a potentially significant expansion in the investigation and prosecution of export control regulations.
The new enforcement program is being led by the Justice Department’s National Security Division. In June, the Attorney General appointed Steven Pelak, a career Justice Department prosecutor, to be the National Export Control Coordinator. Along with Justice, other enforcement agencies in the new Initiative are: the FBI, the Commerce Department’s Bureau of Industry and Security, the State Department’s Directorate of Defense Trade Controls, the Defense Department’s Criminal Investigative Service and the Homeland Security Department’s Immigration and Customs Enforcement.
This message and its contents are intended solely for the use of the Asia Task Force addressee. If you have received this message in error, please notify the sender immediately.
/ The U.S. Chamber of Commerce's is the world's largest business federation, representing 3 million businesses and organizations of every size, sector, and region.