FCC Bans Approval of New Telecommunications Equipment for Entities on the Covered List

On November 25, the Federal Communications Commission  (“FCC” or “the Commission”) issued an order banning the authorization of new equipment sold by telecommunications companies regarding the Commission’s Covered List (the “Order” or “FCC Order”). This decision bans the preliminary consideration, and ultimately the sale, of new telecommunications products in the US for companies on the Covered List. Several Chinese companies are already on the Covered List; the List includes “telecommunications equipment” from Huawei Technologies (“Huawei”) and ZTE Corporation (“ZTE”), along with “video surveillance and telecommunications equipment” produced by Hytera Communications Corporation (“Hytera”), Hangzhou Hikvision Digital Technology Company (“Hikvision”), or Dahua Technology Company (“Dahua”), among other device manufacturers.

The Order itself does not impact devices from these companies that have already received FCC approval; however, the agency also issued a Further Notice of Proposed Rulemaking alongside the Order. This Notice invites comment on these and other related issues, including how the Commission should consider previously-approved items from companies on the Covered List.¹

Legal Background

In March 2020, Congress passed the Secure and Trusted Communications Act of 2020 (“Secure and Trusted Communications Act”), which requires the FCC to publish and maintain a list of telecommunications manufacturers that pose “an unacceptable risk to the national security of the United States or the security and safety of United States persons.”² The FCC published its first iteration of this list, which is known as the Covered List, in March 2021.³ Notably, the Covered List identifies the “telecommunications equipment” and “video surveillance and telecommunications equipment” manufacturers listed above.⁴ At the time, the designation only blocked entities on the Covered List from receiving any Federal subsidy administered by the FCC for the purchase of telecommunications equipment.⁵

On November 11, 2021, the President signed the Secure Equipment Act of 2021 (“Secure Equipment Act”), which required the FCC to adopt new rules that would ban consideration of Equipment Authorization applications submitted by entities named on the Covered List.⁶ Thus, the Secure Equipment Act gave the FCC authority to extend the bans applicable to equipment manufactured by FCC Covered List entities. This FCC Order implements the Secure Equipment Act of 2021.

The FCC’s November 2022 Equipment Authorization Order

The November 2022 FCC Order adopts:

• a ban on future FCC authorizations for equipment manufactured by FCC Covered List entities; and
• a Further Notice of Proposed Rulemaking seeking to further tighten the Equipment Authorization process and associated rules applicable to entities on the FCC Covered List.

The Order prohibits the authorization of new equipment made by entities on the Covered List through the FCC’s Equipment Certification process.⁷ It also makes clear that such equipment cannot be authorized under the Supplier’s Declaration of Conformity process or be imported or marketed under rules that allow exemptions from an equipment authorization.⁸Combined, these measures effectively block any route for new equipment made by manufacturers on the Covered List to access the US market.⁹ However, these measures do not address how the FCC will treat previously approved equipment manufactured by entities on the Covered List; this issue will be addressed in the Further Notice of Proposed Rulemaking.

The Further Notice of Proposed Rulemaking seeks comment on the following issues:

• How the Commission should consider component parts under the prohibition on “authorized equipment”
• Whether the Commission should revoke authorizations held by entities on the Covered List, and the procedure for revoking authorizations, if adopted
• Whether to require all applicants seeking FCC certification to have a US-based responsible party to improve compliance with FCC rules
• Whether further reforms to the FCC’s competitive bidding process for spectrum licenses are necessary¹⁰

Additional Reports on Telecommunications and National Security Coming

In addition to the above-mentioned activity, the National Defense Authorization Act for fiscal year 2023 includes a provision requiring the FCC Chair and the Administrator of the National Telecommunications and Information Administration (“NTIA”) to provide a report to Congress on the national security risks associated with the use of telecommunications companies operating in the US or providing services to affiliates and personnel in the intelligence community with a 10 percent or greater foreign investment by a Chinese company.¹¹ This further indicates that Chinese involvement in the US telecommunication sector may receive greater US government scrutiny in the coming years.