How can American law regulate companies outside of American jurisdiction?

Question

How can American law regulate companies outside of American jurisdiction?

https://asiatimes.com/2020/05/south-korea-is-the-pivot-in-the-huawei-wars/

The semiconductor industry is lobbying furiously with the Commerce Department to interpret the new rules flexibly. In the worst-case scenario, the Commerce Department would ban all chip sales to Huawei from Taiwan and South Korea. That would cripple a large part of Huawei’s business. A looser interpretation would allow a large volume of products to flow to the Chinese telecommunications giant.

After reading this, it seems that the U.S. is enacting laws that regulates the operations of companies that are outside the U.S. and its jurisdiction. What body or international laws allow the U.S. to do that? I don't understand how international law works.

Answer 1

The US cannot directly regulate foreign companies operating outside the US.

The US can indirectly regulate them by punishing US companies that deal with certain foreign companies, or US companies that deal with foreign companies that deal with certain foreign companies. Basically they're saying, "you deal with us or you deal them, make your choice."

And considering the economic power of the US, they can easily discourage foreign companies from dealing with countries like Iran or North Korea. Who would want to be banned from the US market for that? When it comes to China, the choice becomes harder and US influence is lower. China is so significant that nobody would lightly forgo trading with them, even if the US demands it.

---

Follow-Up: The US has so many global interests that it codified the domestic rules and regulations. In a tinpot dictatorship, one would simply ask El Jefe or the Dear Leader what they want. In the US, one has cabinet officials testifying and certifying how a certain case fits into US laws, and hearings in Congress, and lobbyists trying to influence both. That's because of separation of powers and bureaucratic inertia, I guess ...

Answer 2

The U.S. cannot regulate foreign companies doing business in foreign territories. But it can regulate US companies doing business overseas, and it can regulate foreign companies that do business in the US.

Even though most semiconductor manufacturing is done in China, it turns out that a mobile network (and all electronics, really) require lots of different kinds of chips from lots of different companies, and it’s very difficult to build a finished product without using American chip designs. It also turns out to be very difficult to be a globally competitive company without the US as a customer.

Intel, AMD, nVidia, Texas Instruments, Micron, Broadcom, Qualcomm, Cirrus Logic, Analog Devices, Microchip, Atmel, Conexant, and many others are all American semiconductor companies with a stake in the telecommunications market. If the US places an embargo on Huawei, it could impose fines and other punitive measures on US companies that sell to them, and can forbid Huawei’s products from being used in any security-sensitive American infrastructure.

Aside from US companies, the only other nation with as many intellectual property holdings as the US is Japan, and they’re not exactly friendly to Huawei either. Although they don’t call out Huawei specifically, they have banned all telecom equipment that might pose a national security threat (i.e. Chinese companies). Japan is also working to be included in the “Five Eyes” intelligence alliance, so it wouldn’t be very difficult to get Japan to go along with a Huawei embargo.

So while the US cannot directly enjoin foreign companies from doing business with other foreign countries, it does have the economic clout to get most of the western world on board with such a measure.