FCC Prevails in Huawei ‘National Security Threat’ Designation Case

In a ruling ruling last Friday, the Fifth Circuit Court of Appeals denied a petition brought by Huawei Technologies Company and its American subsidiary, asking it, a court of original jurisdiction, to review the Federal Communications Commission’s (FCC) decision as statutorily and constitutionally flawed. The court upheld the agency’s rule because, according to its 61-page opinion, the agency is imbued with the congressional authority to assess and designate national security threats in the telecommunications arena. 

The FCC rule stemmed from a series of executive and legislative enactments beginning in 2018. The rule bars U.S. companies from using federal subsidy money known as the Universal Service Funds, to purchase from companies deemed national security threats to communications networks and supply chains. The companies named in the FCC’s final order are Huawei, ZTE Corp., Hytera Communications Corp., Hangzhou Hikvision Digital Technology Co., and Dahua Technology Co.

The Fifth Circuit considered the global telecommunications equipment and services provider’s challenges to the rule and designation, but ultimately declined them all. The appellate panel addressed Huawei’s argument that the FCC lacked statutory authority to adopt the service fund rule, and described it as the petitioner’s “most troubling challenge.”

The court explained that this was because Huawei questioned whether the executive agency had improperly seized the opportunity to make national security determinations external to its authority and expertise. The panel first declined arguments that it needed to automatically side with the FCC instead of turning to whether the agency deserved deference under the Supreme Court test set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.

Under the two-part test, the appellate court held that the agency acted within its congressionally-given authority in designating Huawei as a national security risk. “We would be troubled if the FCC were trying to leverage its ‘public interest’ authority over networks into the power to make freewheeling national security judgments,” the court wrote. However, the panel was convinced that the agency acted within its broad authority to regulate communications, both consistent with the public interest and informed by the views of other expert agencies.

Huawei is represented by Morgan, Lewis & Bockius and Jones Day, the FCC is represented by its own counsel, and the United States by the Department of Justice.