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FCC Designates Chinese Tech Giants Huawei and ZTE as National-Security Threats

A man walks past a Huawei logo at the International Consumer Electronics Expo in Beijing in 2019. (Thomas Peter/Reuters)

The Federal Communications Commission has formally designated two technology giants closely connected to the Chinese Communist regime as national-security threats to the integrity of telecommunications networks and the communications supply chain.

The designation applies to Huawei Technologies Company and ZTE Corporation.

FCC chairman Ajit Pai announced that, after a full investigation, the commission’s Public Safety and Homeland Security Bureau (PSHSB) concluded that “[b]oth companies have close ties to the Chinese Communist Party and China’s military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country’s intelligence services.” Consequently, the companies pose “national security risks to America’s communications networks — and our 5G future.”

The designation, under a process the FCC adopted last year, in a November 22 order entitled “Protecting Against National Security Threats,” bars Huawei and ZTE from access to money in the Universal Service Fund. The USF is an annual $8.3 billion account funded by fees American consumers and businesses pay on their phone bills. The USF is designed to be spent on developing and maintaining secure networks; the point of the designation process is to foreclose spending on equipment supplied by companies that could threaten national security.

Huawei and ZTE were originally cited when the designation process went into effect. That triggered the PSHSB process that concluded with today’s formal designation announcement.

On Huawei, besides the company’s ties to the Chinese regime, the commission’s designation order noted:

Huawei’s founder, Ren Zhengfei, previously served as a director in the People’s Liberation Army of China (PLA), the armed forces of China and its ruling Communist Party, and that former Huawei employees have provided evidence showing that Huawei provides network services to an entity believed to be an elite cyber-warfare unit within the PLA.

The FCC further observed that credible reports had highlighted known cybersecurity risks and vulnerabilities in Huawei equipment. Moreover, Congress and the executive branch have restricted the purchase and use of Huawei equipment; in fact, the Defense Department has banned the sale of Huawei devices on military bases and other DOD facilities worldwide.

DOD has placed similar prohibitions on ZTE, whose equipment is also notorious for cybersecurity risks and vulnerabilities. The FCC also found that ZTE undermined the U.S. embargo on Iran by sending $32 million of American goods to Iran and then obstructing a Justice Department investigation.

In 2017, ZTE pled guilty to violating U.S. sanctions against Iran. It agreed to pay a fine of over $430 million, as well as additional settlement agreements to other U.S. government security agencies that brought the total payment to over $892 million.

Back in February, the Justice Department announced a racketeering indictment against Huawei, charging it, along with two U.S. subsidiaries, with conspiring to steal trade secrets. The DOJ described the scheme as a “long-running practice of using fraud and deception to misappropriate sophisticated technology from U.S. counterparts.” The indictment alleges, among other things, that Huawei has abetted Iran’s domestic surveillance regime, including during the 2009 demonstrations that were crushed by the Shiite jihadist regime.

The indictment also charged Wanzhou Meng, the Huawei’s chief financial officer. She is currently under house arrest in Canada, fighting extradition on the U.S. charges.

As I noted in a post this morning, China has just pushed through a law that subjects Hong Kong to Beijing’s control, under the guise of national security against “subversion” and “terrorism” — the Communist regime’s words for protests in the formerly semi-autonomous territory. China’s aggression in Hong Kong, its domestic persecution of Uighurs and other groups, and its central role in the coronavirus pandemic, have ratcheted up pressure on the Trump administration to respond with meaningful punitive measures.

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