D.C. Circuit Remands Part of 2022 Gear Order to FCC for Further Work

The U.S. Court of Appeals for the D.C. Circuit gave Chinese companies Hikvision and Dahua a partial victory Tuesday, ruling that the FCC’s definition of critical infrastructure is “overly broad.” However, the three-judge panel rejected arguments that video cameras and video-surveillance equipment the companies manufacture shouldn’t have been placed on the agency’s “covered list” of unsecure gear.

Some lawyers following the proceeding said the decision may prove helpful, forcing the FCC to better define terms like “covered list.” Several said they were still digesting the decision. The agency didn’t comment Tuesday.

The case was argued in December. Judges appeared skeptical of the companies' arguments (see 2312140061). Their arguments would require the court to rule that Congress made a mistake, said Judge Raymond Randolph. Some experts predicted that the court would afford the FCC deference on the issues raised (see 2306200050).

“We hold that the SEA [Secure Equipment Act] ratified the composition of the Covered List and leaves no room for Petitioners to challenge the placement of their products on that list,” said the decision written by Judge Florence Pan. The panel's third judge was Patricia Millett.

“Congress has clearly expressed its view that Petitioners’ products pose a risk to national security in certain circumstances,” Pan wrote. “It appears … that when Congress passed the SEA, it intended to require the FCC to prohibit the marketing and sale of Petitioners’ products for listed purposes within the United States.” The court found “to the extent that there is any ambiguity, the national-security judgments and concerns underlying the Executive Branch’s decision in this case counsel deference.”

But the court also found fault with the FCC’s 2022 order, which further clamped down on gear from Chinese companies, preventing the sale of yet-to-be authorized equipment in the U.S. (see 2211230065).

The court remanded the order to the FCC instructing it “to comport its definition and justification … with the statutory text” of the National Defense Authorization Act for Fiscal Year 2019. “The FCC failed to explain or justify its use of the expansive words ‘connected to,’ and the scope of the definition is therefore arbitrarily broad,” the court said. The agency’s definition “threatens to envelop ever-broadening sectors of the economy. As Petitioners note, the FCC’s definition reads the word ‘critical’ out of the statute and applies the equipment-authorization ban to all ‘infrastructure.’”

The agency doesn’t rebut petitioners’ argument that “'coffee shops, residential apartment buildings, used car lots, and dry-cleaning stores’ could all plausibly fall within the Commission’s definition,” the decision said: During oral argument “the FCC was unable to identify any relevant infrastructure that would not be covered, whether critical or not.”

The FCC doesn’t provide “comprehensible guidance” on “what falls within the bounds of ‘critical infrastructure,’” the court said. Instead, the order “merely states that ‘any’ systems or assets ‘connected to’ a laundry list of economic sectors and functions ‘could reasonably be considered’ critical infrastructure.”