Hikvision, Dahua, Government Make Final 'Covered List' Arguments at D.C. Circuit

Hikvision, Dahua and the U.S. government made final arguments on whether the FCC wrongly barred gear from the Chinese companies from being authorized under the agency’s equipment authorization program and wrongly placed the companies on the FCC’s “covered list.” The pleadings were filed Wednesday at the U.S. Court of Appeals for the D.C Circuit (docket 23-1032). Oral argument hasn’t been scheduled in the case.

“Petitioners’ video equipment is not ‘essential’ to the provision of broadband services, as required to be eligible for the Covered List,” Hikvision and Dahua said in a final brief. “Nor are Petitioners’ products ‘communications equipment’ under the Secure and Trusted Communications Networks Act of 2019,” the companies said: “That Act focuses on securing equipment essential to broadband networks that provide transmission service, not equipment used to create content sent over those networks.”

The FCC also never made the determination required by the act that the gear is a national security threat to broadband networks, the companies said. “Unlike the network equipment produced by Huawei -- which the Commission, affirmed by the courts, determined to be capable of intercepting and misrouting traffic -- Petitioners’ equipment lacks capabilities needed to threaten national security,” they said.

Hikvision and Dahua said the FCC put too much emphasis on provisions in the National Defense Authorization Act for FY 2019. The NDAA “mentions Petitioners’ video surveillance equipment, but it does not even bar federal agencies from purchasing that equipment,” they said. “The Commission erred by concluding that, even if Petitioners’ equipment is not capable of harming networks, it nevertheless must be placed on the Covered List,” they said.

The companies also addressed the issue of whether their appeal is untimely. “This Court’s precedents permit parties to challenge agency actions outside the Hobbs Act’s 60-day filing period when an agency reopens an earlier issue or applies it in a new way,” they said: “Any other policy would allow agencies to enact seemingly innocuous regulations and later attach drastic consequences to those rules without having to account for their authority to do so.” The companies note they weren’t affected by initial placement on the covered list because they don’t receive federal subsidies.

“The FCC concluded that it had legal authority to prohibit the authorization of Covered Equipment both under the Secure Equipment Act and, independently, under earlier-enacted statutes,” DOJ and the FCC responded in a final brief.

“Although the companies contended that their equipment was ‘not marketed or promoted for … prohibited purposes,’ a report in the record ‘found that between 2015 and 2021 nearly 1,700 state and local governments had purchased equipment on the Covered List, including equipment produced by Hytera, Hikvision, and Dahua,’” the government said: “And because the products are sold in the United States through independent dealers, the FCC observed that the companies ‘lack… oversight…over the marketing, distribution, and sales of their respective equipment.’”

DOJ and the FCC questioned the timeliness of the challenge under the Hobbs Act. “This Court lacks jurisdiction to hear later challenges,” the brief said. “Courts recognize an exception to this jurisdictional limit where an agency ‘reopens’ a previous decision by reconsidering it,” they conceded: But precedent dictates that when an agency “merely responds to an unsolicited comment by reaffirming its prior position, that response does not create a new opportunity for review.” Petitioners “bear the burden of showing reopening has occurred.”