A Tailored Approach to Meet National Security Objectives: How the FCC Can Protect Innovation and Supply Chains
The Federal Communications Commission (FCC) is significantly expanding the reach of a national security tool known as the “Covered List,” with potentially significant consequences for U.S. supply chains, consumers, and technological innovation.
The Covered List identifies communications equipment and services that the U.S. government has determined pose an unacceptable risk to national security. Its significance is straightforward. Many electronic products need FCC approval before they can legally be imported or sold in the U.S., and equipment on the Covered List generally cannot receive that approval. As a result, adding equipment to the list can effectively prevent affected products from entering the U.S. market.
Historically, the Covered List largely focused on equipment and services associated with specifically identified companies, including Chinese telecommunications companies such as Huawei and ZTE. The basic approach was relatively straightforward: the government identified a particular company as presenting a clear national security risk and restricted certain equipment associated with that company.
The FCC is now taking a much broader approach. Recent additions to the Covered List encompass entire categories of products based on where they are produced, including:
- Routers produced in a foreign country;
- Foreign-produced power inverters;
- Foreign-produced drones and drone components; and
- Foreign-produced advanced robotic devices.
Items can be added to the Covered List without first going through the FCC’s traditional public rulemaking process, meaning businesses and consumers may have no opportunity to weigh in before the restrictions take effect. The consequences are significant. Affected equipment can be blocked from receiving the FCC approval generally necessary to enter the U.S. market, while companies that market prohibited equipment can face substantial enforcement liability.
To illustrate, restricting routers made by ZTE follows from the government’s specific determination that ZTE presents a national security risk. But why would a router manufactured by an otherwise trusted company in Japan, Taiwan, Mexico, or another non-adversary country face the same restriction simply because it is foreign-produced?
At the same time, the FCC has adopted and is considering additional rules that could extend these restrictions deeper into technology supply chains. These actions could affect not only who produces a finished product, but also the hardware and software contained within it, where individual components are produced, and the information companies must collect and provide about their supply chains.
Modern technology supply chains are global and deeply interconnected. A single product may be designed in the U.S., assembled in another country, and contain chips, memory, sensors, processors, and other components manufactured by suppliers around the world. These global supply chains support consumer electronics, internet infrastructure, data centers, energy systems, advanced robotics, and countless other technologies used throughout the U.S. economy.
Broad restrictions based on where products or their components are produced could significantly reduce the number of available suppliers. Companies may be forced to restructure longstanding supply chains, find alternative components, redesign products, or move manufacturing. Those changes take time and come at a cost, potentially resulting in delayed products, reduced competition, and higher prices for American businesses and consumers.
The potential economic impact is significant. CCIA Research Center analysis estimates that the FCC’s recent restrictions based on where products are manufactured could impose approximately $4.4 billion in supply chain costs on U.S. industry and consumers over five years. A more targeted approach could achieve the FCC’s national security objectives at a fraction of that cost.
That distinction matters. Equipment manufactured in a close U.S. ally or trading partner does not present the same national security concerns as equipment produced by or tied to a foreign adversary. Treating those supply chains alike risks cutting trusted partners out of the manufacturing process and pushing companies toward domestic production even when secure alternatives exist elsewhere.
There is a better approach. The FCC should focus its restrictions on countries, companies, and technologies that present identifiable national security risks while allowing American businesses to continue sourcing from trusted suppliers in non-adversary countries. This approach would help reduce U.S. dependence on foreign adversaries without requiring companies to recreate complex global supply chains.
The stakes are particularly high as the U.S. competes with China for global leadership in artificial intelligence (AI). AI leadership depends on more than software and advanced models. It also requires chips, networking equipment, power systems, robotics, and other physical infrastructure. American companies need access to hardware and components from around the world to deploy these technologies.
The FCC has an important role to play in protecting the security of U.S. communications networks and technology supply chains. But national security regulation works best when it targets identifiable risks rather than treating foreign production itself as the threat. A more targeted approach can reduce dangerous dependencies on foreign adversaries while preserving access to trusted global supply chains and the technologies American companies need to compete.
