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FCC closes chip-level loophole in national security equipment rules

FCC closes chip-level loophole in national security equipment rules

Rule Changes

Final rule bans covered-list components and requires online marketplaces to show FCC IDs

Yesterday: Final rule published in Federal Register

Overview

Updated Yesterday

The FCC's national security rules just moved from finished devices to the chips inside them. Starting October 13, 2026, any device containing a logic-bearing hardware component made by a company on its Covered List, such as Huawei, loses eligibility for FCC authorization regardless of who assembled the final product.

The same order forces online marketplaces to display a device's FCC ID at the point of sale, and pushes any modification by a listed entity into full recertification. The FCC puts one-time compliance costs at up to $300 million against estimated security benefits above $1 billion a year. A companion rulemaking seeks comment on extending the framework to software, submarine cables, and U.S.-based liable parties.

Why it matters

Devices with chips made by Huawei lose US market access; online marketplaces must verify and display FCC authorization.

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Key Indicators

$300M
One-time compliance cost
FCC estimate for marketplaces and sellers updating listing systems.
<$40M
Annual recurring compliance cost
Mostly sellers adding FCC IDs to covered listings, per the FCC.
$1B+
Estimated annual security benefits
Reduced espionage, network disruption, and unauthorized access risk, per the FCC.
9,000/sec
Logic-bearing component threshold
Components using digital timing signals above this rate trigger the prohibition.

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People Involved

Organizations Involved

Timeline

March 2020 October 2026

8 events Latest: Yesterday
Tap a bar to jump to that date
  1. Rules take effect

    Upcoming Regulation

    Component prohibition and marketplace FCC-ID display requirements become binding.

  2. Final rule published in Federal Register

    Latest Regulation

    Third Report and Order appears as 91 FR 57798, effective October 13, 2026.

  3. Third Further Notice published

    Regulation

    FCC seeks comment on software bans, submarine cable rules, and U.S. liable parties.

  4. Third Report and Order adopted

    Regulation

    FCC votes to close the component-part loophole and extend marketing rules to online marketplaces.

  5. Second Report and Order published

    Regulation

    FCC clarifies the scope of the ban and the meaning of 'produced by.'

  6. First Report and Order published

    Regulation

    FCC publishes first equipment authorization rules; Huawei and ZTE join the Covered List.

  7. Secure Equipment Act signed

    Legislation

    Law bars FCC authorization of Covered List equipment within one year.

  8. Secure Networks Act becomes law

    Legislation

    President signs the Secure and Trusted Communications Networks Act, directing the FCC to track risky equipment.

Scenarios

1

Component ban holds and reshapes marketplaces

Likely Resolves by Oct 13, 2027

Discussed by: Wiley Rein and Holland & Knight alerts, which note the rule applies prospectively and is unlikely to disrupt existing equipment

No successful court challenge emerges. The rule takes effect October 13; online marketplaces build FCC ID display tools while device makers source components away from covered entities. Compliance costs land within the FCC's stated estimates and the ban becomes the baseline for US market access.

2

Courts strike down the component rule as beyond FCC authority

Possible Resolves by Q2 2028

Discussed by: The D.C. Circuit's prior remand of the 'connected to' definition in this docket; Holland & Knight flags legal risk in extending rules past complete equipment

Device makers or covered entities petition for review, arguing the FCC lacks statutory authority to regulate components rather than equipment. The court agrees the agency overstepped and vacates or remands the component prohibition, forcing the FCC back to rulemaking.

3

FCC pushes further with software bans and U.S. liable-party rules

Possible Resolves by End of 2027

Discussed by: FCC's Third Further Notice of Proposed Rulemaking, filed August 2026

After reply comments close September 21, the FCC drafts a Fourth Report and Order. The most likely adoptions are a U.S.-based liable-party requirement for certified equipment and submarine cable Covered List rules. Extending the prohibition to software or firmware remains contested inside and outside the agency.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

April–July 2018

ZTE supply ban (2018)

The Commerce Department barred US companies from selling to ZTE for seven years after the Chinese firm violated sanctions against Iran and North Korea. ZTE, one of the world's largest telecom equipment makers, shut down major production lines within weeks.

Then

ZTE halted main operations; the US lifted the ban in July after ZTE paid a $1 billion fine and accepted a US compliance monitor.

Now

Established the template for using supply-chain leverage against Chinese telecom firms, an approach the FCC now applies to consumer equipment at the component level.

Why this matters now

Shows how equipment-level restrictions ripple through global supply chains, the same dynamic the FCC's component rule now triggers.

August 2019

NDAA Section 889 (2019)

Congress banned the US government from procuring, or contracting with entities using, Huawei and ZTE equipment. Federal agencies and contractors had to inventory and remove covered gear.

Then

Huawei and ZTE lost nearly all US government business; agencies ran large removal programs.

Now

Set the legislative template that the Secure Networks Act and Secure Equipment Act extended from government procurement to the broader communications supply chain.

Why this matters now

Section 889 restricted who the government buys from; this FCC rule controls what any device sold in the US market may contain internally.

May 2019

Huawei Entity List placement (2019)

Commerce added Huawei to the Entity List, requiring licenses for US companies to sell it chips and software. Google cut Huawei off from Android updates and chip suppliers stopped shipping.

Then

Huawei's smartphone business collapsed outside China and it accelerated domestic supply-chain building.

Now

Deepened US-China tech decoupling and pushed China's push for semiconductor self-sufficiency.

Why this matters now

The FCC's component rule moves the same decoupling logic from export controls over who US firms may sell to, to authorization of what products may be sold in the US.

Sources

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