FCC Expands Ban on Chinese Telecom Devices

Government Contract Concepts. FCC Expands Ban on Chinese Telecom Devices

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As seasoned operatives in the US defense industry are well aware, the US government has taken several actions in recent years to counter the threat of Chinese technology adoption and the impact on US defense capabilities.

These actions include a ban on defense contractors using telecommunications equipment or services made by Huawei Technologies Co. or ZTE Corp., and a recent requirement that defense contractors disclose certain activities in China.

The U.S. government has taken this effort to another, broader level, as the Federal Communications Commission has now effectively banned some Chinese telecommunications and video surveillance devices from entering the U.S. market, demonstrating the strength of its authority over nearly all electronic equipment that has been operating until now. is carried out only to solve technical, scientific and engineering problems.

With the support of Congress, the FCC has now become a powerful tool to exclude products from the US market on national security grounds.

Specifically, the FCC issued a report and order and a supplemental notice of proposed rulemaking on November 25 that changed the FCC’s device and equipment authorization rules to generally prohibit the importation, marketing, and sale of radio frequency devices and equipment by entities that the FCC are determined, based on input from the national security community, to pose a threat to the security of US supply chains and networks.

The commission has published a list of such entities on its “Covered List,” and each of the equipment manufacturers on the list has some connection to the Chinese government. Radio frequency devices and equipment are devices that generate and/or emit radio frequency energy, effectively making up all electronic devices. Subsequently, all FCC device and equipment permit applicants must certify that they are not subject to this prohibition in order to secure their permits.

Moreover, the FCC has anticipated potentially larger changes to its rules in its efforts to advance national security goals. For example, the Commission requested comment on whether and to what extent existing permits for devices and equipment held by covered entities should be revoked so that equipment already on the market could be declared illegal. It also asked whether the new ban should extend to “components” made by covered entities but used by others in their own devices and equipment. How it decides these and other issues presented in the notice of proposed rulemaking could have a profound impact on the market for RF devices and equipment in the United States.

The Communications Act requires the FCC to issue a permit for devices and equipment that generate and/or emit RF emissions before they are imported, marketed, or sold into the United States. Such permits are necessary to ensure that devices and equipment do not exceed certain emission thresholds that may cause harmful interference to other services and equipment or present health and safety risks.

For decades, the FCC has generally issued broad-based permits for devices and equipment, including to foreign-owned companies, provided they meet RF emissions rules. But the newly enacted laws, driven in part by rising tensions in US-China relations, have prompted the commission to reconsider this approach.

The Report and Order amended the FCC’s device and equipment authorization rules to prohibit the authorization of telecommunications and video surveillance equipment imported, marketed, or sold by an entity on the covered list.

Underscoring the impact of denying equipment permits to these entities, FCC Chair Jessica Rosenworcel explained in an accompanying statement:

“Our action today concerns base station equipment that enters our networks. It includes phones, cameras, and Wi-Fi routers that enter our homes. And it includes rebranded or “white label” equipment developed for the market. In other words, this approach is comprehensive.”

The new rules also closed loopholes that might otherwise have allowed equipment to continue to be sold on the Covered List. Moreover, while the FCC declined to immediately rule on whether to revoke existing device authorizations from Covered List manufacturers, it set the stage for doing so by concluding that the agency has the authority to revoke authorizations for Covered List devices that were authorized prior to the Report. and the adoption of the Order on November 11.

In an accompanying follow-up notice, the FCC made clear that it could continue to use equipment authorization rules as leverage to promote national security concerns.

The ban adopted in the Report and Order is prospective and therefore does not require the removal of equipment previously manufactured by Covered List Entities. In a follow-up notice, the FCC asks whether and under what circumstances the ban should be retroactive. Given that the equipment on the list remains on the telecommunications networks of many operators, any retroactive ban could have a significant financial impact. While Congress has previously provided funding to carriers to “rip and replace” such equipment from their networks, the demand for existing funding far exceeds the amounts appropriated.

Furthermore, the new rules do not require applicants for an equipment permit to indicate whether any component of the equipment subject to the permit consists of covered equipment.

In a subsequent notice, the FCC acknowledges that this may be a rule loophole. Accordingly, it requested comment on the extent to which component equipment parts should be considered in the prohibition of covered equipment and on a number of related issues, including what should be considered a “component part.”

Yaron Dorey is a partner and Trevor Bernardo and Jocelyn Jezierny are partners in Covington & Burling LLP’s Communications and Media practice group. Matt Del Nero, also a partner, contributed to this article.

Topics: Contract conclusion, contract rules, ethics, international