China and the United States have been at the forefront of global technological advancements and innovation, but as tensions continue to intensify in the trade and security arena, the U.S. has once again stepped up its regulatory action against Chinese technology imports. The Federal Communications Commission recently issued a huge expansion of its current ban on telecommunications and surveillance equipment, including older versions of equipment from several major Chinese manufacturers. The change comes after the previous policy applied only to new designs, and is more hardline towards the national security threat posed by foreign-made electronic equipment. Broadened to include the majority of the import ban reflects a growing sense of worry inside the U.S. government over the vulnerabilities that can lie inside international supply chains and also the critical infrastructure that relies on them. Clearly, Washington has gone further than just stopping future infiltration and is now actively trying to purify the technology landscape it already has, whether it means upsetting the status quo of the market and consumer.
In 2022, the FCC issued its initial order banning the deployment of new models of telecommunications and video surveillance equipment from a Chinese company group comprising industry heavyweights such as Huawei and ZTE, as well as Hytera, Hikvision and Dahua. The reason for the original ban, and now for the expanded ban, has always been the threat posed to U.S. national security by these products. The FCC’s new ruling puts public safety, the security of government facilities and the physical security of critical infrastructure above all else. The agency is able to make this decision with a strong mandate – frequently brought into play within a legal and political framework – which does not give industry much room to contest it and which prioritises the integrity of communications over commercial and international considerations. The wide-ranging ban will go into effect in early July, which is an extremely tight timeline for importers and users of this equipment to adapt to the new regulatory environment.
Although the sweeping restrictions are new, the FCC made a pragmatic concession to the American public and businesses who have already invested a significant amount of money in this technology. The agency confirmed that the equipment they already own will still be available for use by people and groups. The carve-out is an essential part of the policy, in that it ensures that none of the immediate and expensive disruption that could have paralysed smaller businesses and local governments that depend on security and networking equipment made in China will occur. But it also presents a complicated situation in which the number of older models is limited. These devices will eventually be unable to be replaced with newer versions from the manufacturers that are banned, leading to a progressive shift to other manufacturers, most probably U.S.- or European-made or from another ally nation. A phased approach means a long-term technology-decoupling strategy, as the U.S. slowly moves away from China in its most sensitive industries.
This is the latest in a coordinated campaign by the U.S. government to reduce the power of China in the U.S. tech industry. The FCC hasn’t been alone in taking action; this is one of multiple actions addressing different parts of the Chinese tech industry. The commission banned in December the importation of new models of Chinese-made drones—a category in which Chinese companies such as DJI have a strong global market share. Earlier this year, in March, Chinese consumer routers were banned from selling new models due to restrictions on these routers, which are commonly used in small businesses and homes in America. The new order is notable in its exceptionality for allowing the importation of prior models of drones and routers. This suggests that the FCC may be looking at a piecemeal strategy for regulation, with it being more aggressive in its regulatory approach to the high-risk area of telecommunications, and taking a more gentle hand when it comes to more consumer-focused electronics. But that’s the point: these other categories of products could be the ones that are targeted for future growth, as with the older telecom equipment.
As a result, the legal and political controversies surrounding these bans are growing in intensity, with the companies involved declaring their willingness to challenge the restrictions for what they view as being arbitrary and without any basis. In December, Hikvision, one of the world’s largest manufacturers of video surveillance equipment, launched a lawsuit against the previous FCC decision. The company said the agency had gone beyond its statutory mandate and there was little justification for any of its decisions.
