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UPDATE 1-U.S. reviewing requests to export to Huawei with 'highest scrutiny' -Commerce Dept

-Commerce Dept@ (Adds background, context)

WASHINGTON, July 3 (Reuters) - The U.S. government said on Wednesday it was reviewing license requests from U.S. companies seeking to export products to China's Huawei Technologies Co Ltd "under the highest national security scrutiny," since the company is still blacklisted.

In an email to Reuters, the Commerce Department said that as it reviewed applications, it was applying the "presumption of denial" standard associated with Entity Listed companies, meaning applications are unlikely to be approved.

President Donald Trump surprised markets on Saturday with an announcement that U.S. companies would be allowed to sell products to Huawei, which was placed on the so-called Entity List in May over national security concerns.

U.S. chipmakers, which had been seeking a carve-out for exports of less sensitive technology to the world's top telecoms technology maker, welcomed the news.

But four days after Trump's announcement on the sidelines of the G20 in Japan, uncertainty over how the Huawei ban will be eased has fueled a scramble among industry and government officials alike to grasp what the new policy will be.

In an email to enforcement staff on Monday, seen by Reuters, John Sonderman, Deputy Director of the Office of Export Enforcement in the Commerce Department's Bureau of Industry and Security, sought to clarify how agents should approach license requests by firms seeking approval to sell to Huawei.

All such applications should be considered on merit, he wrote, citing regulations that include the "presumption of denial" licensing policy.

The Commerce Department spokesman said on Wednesday that the Department intends to notify companies of decisions on export license applications once the review is complete.

White House trade adviser Peter Navarro said earlier this week that the government would allow "lower tech" chip sales that do not impact national security, echoing similar comments from National Economic Council chairman Larry Kudlow.

The United States has accused Huawei of stealing American intellectual property and violating Iran sanctions.

It has launched a lobbying effort to convince U.S. allies to keep Huawei out of next-generation 5G telecommunications infrastructure, citing concerns the company could spy on customers. Huawei has denied the allegations.

Trump unveiled the Huawei policy shift as an olive branch to Chinese President Xi Jinping as part of an effort to revive trade talks between the world's top two economies, which have been engaged in a tit-for-tat trade war. (Reporting by Alexandra Alper, editing by G Crosse and Rosalba O'Brien)