throbber
Case: 19-60896 Document: 00515905664 Page: 1 Date Filed: 06/18/2021
`
` United States Court of Appeals
`for the Fifth Circuit
`
`
`No. 19-60896
`
`
`Huawei Technologies USA, Incorporated; Huawei
`Technologies Company, Limited,
`
`
`United States Court of Appeals
`Fifth Circuit
`
`FILED
`June 18, 2021
`
`Lyle W. Cayce
`Clerk
`
`versus
`
`Petitioners,
`
`
`Federal Communications Commission; United States of
`America,
`
`
`Respondents.
`
`
`
`
`On Petition for Review of an Order of the
`Federal Communications Commission, No. 19-121
`
`
`
`Before Elrod, Duncan, and Wilson, Circuit Judges.
`Stuart Kyle Duncan, Circuit Judge:
`
`An FCC rule bars using government subsidies to buy equipment from
`companies designated security risks to communications networks. See
`Protecting Against National Security Threats to the Communications Supply
`Chain Through FCC Programs, 85 Fed. Reg. 230-01 (Jan. 3, 2020). We
`consider a challenge to that rule by Huawei Technologies Company and its
`American affiliate, Huawei Technologies USA.
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 2 Date Filed: 06/18/2021
`
`No. 19-60896
`
`Introduction
`
`The federal government annually distributes billions of dollars to
`promote telephone and Internet service across our nation. These subsidies,
`called “universal service funds,” are administered by the Federal
`Communications Commission (“FCC”). Last year, that agency issued a rule
`barring recipients from using the funds to buy equipment or services from
`companies designated “national security risks” to communications networks
`and supply chains. Under the rule, the FCC designated Huawei, a Chinese
`telecom provider, and its American affiliate as national security risks. The
`companies now level myriad challenges, both statutory and constitutional, to
`the rule and to their designation.
`
`Their most troubling challenge is that the rule illegally arrogates to the
`FCC the power to make judgments about national security that lie outside
`the agency’s authority and expertise. That claim gives us pause. The FCC
`deals with national communications, not foreign relations. It is not the
`Department of Defense, or the National Security Agency, or the President.
`If we were convinced that the FCC is here acting as “a sort of junior-varsity
`[State Department],” Mistretta v. United States, 488 U.S. 361, 427 (1989)
`(Scalia, J., dissenting), we would set the rule aside.
`
`But no such skullduggery is afoot. Assessing security risks to telecom
`networks falls in the FCC’s wheelhouse. And the agency’s judgments about
`national security receive robust input from other expert agencies and
`officials. We are therefore persuaded that, in crafting the rule, the agency
`reasonably acted within the broad authority Congress gave it to regulate
`communications. Additionally, having carefully considered the companies’
`other challenges under the Administrative Procedure Act and the
`Constitution, we find those unavailing as well.
`
`We therefore deny the petition for review.
`
`2
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 3 Date Filed: 06/18/2021
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`No. 19-60896
`
`Table of Contents
`
`Background .................................................................................................. 4
`Procedural History ...................................................................................... 11
`Standard of Review ..................................................................................... 12
`Discussion .................................................................................................. 14
`I. Ripeness ................................................................................................ 14
`II. Statutory Authority ............................................................................. 17
`A. Lack of Express Prohibition in Act ................................................... 17
`B. Chevron Analysis ............................................................................... 18
`1. “Public Interest” Provisions ........................................................... 19
`2. “Quality Services” Provision ........................................................ 25
`C. Additional Arguments ..................................................................... 30
`1. Lack of National Security Expertise ............................................... 30
`2. Conflict with Presidential Authority ............................................... 31
`3. Secure Networks Act ..................................................................... 32
`III. Substantive Challenges....................................................................... 37
`A. Adequacy of Notice .......................................................................... 37
`B. Arbitrary and Capricious Review ...................................................... 41
`1. Consideration of Relevant Evidence and Arguments ...................... 41
`2. Cost-Benefit Analysis .................................................................... 46
`3. Rejection of Risk-Based Approach .................................................. 51
`C. Vagueness ........................................................................................ 54
`D. Due Process ..................................................................................... 58
`IV. Conclusion ......................................................................................... 61
`
`3
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`

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`Case: 19-60896 Document: 00515905664 Page: 4 Date Filed: 06/18/2021
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`No. 19-60896
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`Background
`
`Huawei Technologies Company (“Huawei”) is a global provider of
`
`telecommunications equipment and services established and headquartered
`in China. It supplies smart device, cloud, and 5G broadband cellular
`technology to commercial entities and consumers. Huawei-USA launched in
`2001 and maintains its U.S. headquarters in Plano, Texas.
`
`As early as 2011, Huawei began attracting the U.S. government’s
`
`attention as a potential security risk to American telecommunications
`networks.1 In October 2012, the U.S. House Permanent Select Committee
`on Intelligence (“HPSCI”) published a report finding, “Huawei . . . cannot
`be trusted to be free of foreign state influence and thus pose[s] a security
`threat to the United States and to our systems.” HPSCI Report, at vi–vii. The
`HPSCI admonished U.S. government systems operators and contractors to
`exclude Huawei equipment and encouraged private entities to reconsider
`Huawei-associated security risks and “seek other vendors.” Id. at vi.
`
`In late 2017, members of Congress expressed apprehension about
`
`“Chinese espionage” and “Huawei’s role in [it]” to then-Chairman of the
`FCC, Ajit Pai.2 Pai’s reply conveyed “share[d] . . . concerns about the
`security threat that Huawei and other Chinese technology companies pose to
`our communications networks.”3 He promised “to take proactive steps” to
`
`
`
`1 Mike Rogers & C.A. Dutch Ruppersberger, HPSCI,
`Investigative Report on the U.S. National Security Issues Posed by
`Chinese Telecommunications Companies Huawei and ZTE iv (2012),
`https://tinyurl.com/yyp5muou [hereinafter HPSCI Report].
`2 Letter from Tom Cotton et al., Members, U.S. Congr., to Ajit Pai, Chairman &
`Commiss’r, FCC (Dec. 20, 2017), https://tinyurl.com/yx6xp217.
`3 Letter from Ajit Pai, Chairman, FCC, to Tom Cotton, Sen., U.S. S. (Mar. 20,
`2018), https://tinyurl.com/u2verd9.
`
`4
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`

`

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`No. 19-60896
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`“ensure the integrity of the communications supply chain . . . in the near
`future.” Id.
`
`Around this time, Congress passed, and the President signed into law,
`
`the National Defense Authorization Act for Fiscal Year 2018 (“2018
`NDAA”), which barred the Defense Department
`from procuring
`telecommunications equipment produced by Huawei.4 The 2019 NDAA
`went further, prohibiting all executive agencies from obtaining Huawei
`equipment, contracting with entities that use it, or using loan or grant funds
`to obtain it.5 Sharing these concerns, then-President Donald Trump issued
`executive orders addressing the issue in 2019 and 2020.6
`
`Against this backdrop, the FCC issued an April 2018 notice of
`
`proposed rulemaking (“NPRM”), “In the Matter of Protecting Against
`National Security Threats to the Communications Supply Chain Through
`FCC Programs.”7 The notice concerned “universal service funds” (or
`“USF funds”), a pool of money the FCC dispenses to certain providers to
`promote “universal service.” See 47 U.S.C. § 254(e); see also Alenco
`Commc’ns, Inc. v. FCC, 201 F.3d 608, 617 (5th Cir. 2000).8 USF funds foster
`affordable telephone and internet access in high-cost areas, subsidize rates
`
`
`
`4 See Pub. L. No. 115-91, § 1656(b)(1), (c)(3)(A), 131 Stat. 1283, 1762 (2017).
`5 See Pub. L. No. 115-232, § 889(a)–(b), (f)(3)(A), 132 Stat. 1636, 1917–18 (2018).
`6 Exec. Order No. 13,873, 84 Fed. Reg. 22,689 (May 15, 2019); Exec. Order No.
`13913, 85 Fed. Reg. 19,643 (Apr. 4, 2020).
`7 Notice of Proposed Rulemaking in the Matter of Protecting Against National
`Security Threats to the Communications Supply Chain Through FCC Programs (“Supply
`Chain Rulemaking”), FCC 18-42, WC Docket No. 18-89, 33 FCC Rcd. 4058 (released Apr.
`18, 2018).
`8 Universal service is defined as “an evolving level of telecommunications services
`that the Commission shall establish periodically . . . , taking into account advances in
`telecommunications and information technologies and services.” § 254(c)(1).
`
`5
`
`

`

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`No. 19-60896
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`for rural health care facilities, and support services for schools and libraries.9
`The NPRM sought comment on a proposed rule that would prohibit using
`USF funds “to purchase equipment or services from any communications
`equipment or service providers identified as posing a national security risk to
`communications networks or the communications supply chain.” 33 FCC
`Rcd. at 4058. The NPRM also solicited comment on “how to identify
`companies” that pose such threats and proposed several approaches.10 Id. at
`4064. Comment was also sought on other steps the FCC could take, waivers
`for USF applicants, costs and benefits, and sources of legal authority for the
`rule. Id. at 4068–70. The NPRM drew extensive comments, including from
`Huawei.11
`
`
`
`9 See 47 U.S.C. § 254; Tex. Off. of Pub. Util. Couns. v. FCC, 183 F.3d 393, 406, 407–
`08 (5th Cir. 1999) [hereinafter TOPUC I]. The USF fund’s annual budget is about $8
`billion. Universal Service Administrative Co., 2020 Annual Report 5
`(2021),
`https://www.usac.org/wp-content/uploads/about/documents/annual-
`reports/2020/USAC_Annual_Report_2020.pdf. In 2020, about $800 million of those
`funds were allocated to the FCC’s Lifeline Program, which “supports telecommunications
`companies that offer discounted phone and broadband services to eligible consumers,”
`while just over $5 billion were allocated to the High Cost Program, which subsidizes the
`expansion of broadband networks in rural communities. Id. at 5, 12, 14.
`10 For instance, one suggested approach was to define a covered company as one
`“from which any agency of the Federal Government has been prohibited by Congress from
`procuring or obtaining any equipment, system, or service that uses telecommunications
`equipment or services provided by that company . . . .” 33 FCC Rcd. at 4064–65; see also
`id. at 4065–66 (suggesting other approaches).
`11 Some commenters argued the proposed prohibition went “too far” by including
`end-user devices like smartphones. Others commented the rule would “cause substantial
`harm” to small rural carriers without “corresponding benefits.” Still others advocated the
`FCC employ “a more targeted approach” than a “blanket prohibition on the use of any
`equipment provided by a blacklisted vendor.” Huawei argued the proposed rule would
`exceed the Commission’s statutory authority, would be arbitrary and capricious under the
`APA, and would violate covered companies’ due process rights.
`
`6
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 7 Date Filed: 06/18/2021
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`No. 19-60896
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`Ultimately, the FCC released a final rule (the “USF Rule”) barring
`
`use of USF funds to buy equipment or services provided by a company
`“posing a national security threat to the integrity of communications
`networks or the communications supply chain.” 47 C.F.R. § 54.9(a). The
`USF Rule also adopted a process for designating covered companies that
`involves an initial designation by the Public Safety and Homeland Security
`Bureau (“Bureau”), a comment period, and a final designation. Id.
`§ 54.9(b).12
`
`In the cases of Huawei and ZTE Corporation, another Chinese
`
`telecommunications company, the FCC found the rulemaking record, as well
`as additional classified information, sufficient to initially designate both
`companies.13 Thus, in the Report and Order (“USF Order”) accompanying
`the USF Rule, the Commission announced Huawei’s and ZTE’s initial
`designations and directed the Bureau to “implement the next [designation]
`steps.” 34 FCC Rcd. at 11440, 11449. The FCC also used the USF Order to
`explain its legal authority to adopt the rule, describe the designation standard,
`justify the rule’s scope, provide a cost-benefit analysis, and otherwise
`respond to commenters.
`
`
`
`12 The Bureau is “the FCC’s primary expert on public safety and homeland
`security matters.” Public Safety and Homeland Security, FCC, https://www.fcc.gov/public-
`safety-and-homeland-security (last visited June 17, 2021). When the Bureau determines a
`company poses “a national security threat,” it issues a notice of initial designation.
`§ 54.9(b)(1). Interested parties may file comments opposing or otherwise responding to the
`initial designation. § 54.9(b)(2). If opposed, a final designation takes effect only upon the
`Bureau’s determination the company should be designated. Id. The Bureau may reverse a
`final designation if it finds the entity no longer poses a threat. § 54.9(b)(3). The Bureau may
`also revise the designation process or adopt a new one. Id. § 54.9(b)(4).
`13 Report & Order in Supply Chain Rulemaking, FCC 19-121, WC Docket No. 18-
`89 & PS Docket Nos. 19-351, 19-352, 34 FCC Rcd. 11423, 11439–40 & n.124 (released Nov.
`26, 2019).
`
`7
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`

`

`Case: 19-60896 Document: 00515905664 Page: 8 Date Filed: 06/18/2021
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`No. 19-60896
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`First, as to its legal authority, the FCC explained that 47 U.S.C.
`
`§ 254(e) permits it “to specify what a USF recipient may or must do with
`[universal service] funds.”14 Id. at 11434 (citation omitted). The FCC drew
`additional authority from various provisions in Title 47 empowering the
`agency to use USF funds to promote the public’s interest in quality services
`and network security. Id. at 11434–37.15
`
`The FCC also stated it would consider “all available evidence to
`
`determine whether an entity poses a national security threat.” Id. at 11438.
`Such evidence might include findings by the Commission, Congress, the
`President, or other executive agencies that an entity “poses a national
`security threat” or “other available evidence, . . . open source or classified,”
`supporting such an assessment. Ibid. The FCC said it would “seek to
`harmonize its determinations” with those of other Executive Branch
`agencies and Congress “[w]here appropriate.” Id. at 11438–39.
`
`Addressing the rule’s scope, the FCC explained the rule applies to
`
`“any and all equipment or services, including software, produced or provided
`by a covered company.” Id. at 11449. This “blanket prohibition” would
`
`
`
`14 Specifically, section 254(e) provides that a carrier that receives USF funds “shall
`use that support only for the provision, maintenance, and upgrading of facilities and
`services for which the support is intended.” 47 U.S.C. § 254(e).
`15 See id. § 254(b)(1) (directing FCC to base universal service policies on six
`principles including promoting “[q]uality services . . . at just, reasonable, and affordable
`rates”); id. § 201(b) (Commission “may prescribe such rules and regulations as may be
`necessary in the public interest to carry out” the Communications Act); id. § 254(c)(1)(A),
`(D) (FCC and Joint Board must “consider the extent to which such telecommunications
`services” are “essential to . . . public safety” and “consistent with the public interest,
`convenience, and necessity”). The agency also cited § 105 of the Communications
`Assistance for Law Enforcement Act (“CALEA”), 47 U.S.C. § 1004, which permits
`carriers to authorize “interception of communications or access to call-identifying
`information effected within its switching premises” pursuant to “a court order or other
`lawful authorization.” We discuss these provisions in greater detail, infra.
`
`8
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`

`

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`No. 19-60896
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`“best promote[] national security, provide[] the most administrable rule, and
`ease[] compliance for USF recipients.” Ibid. While admitting a broad rule
`would “impose attendant costs on providers” and rural consumers, the
`Commission estimated the rule’s benefits, though hard to quantify,16 would
`“significantly and substantially outweigh” its costs. Id. at 11449–53, 11466.17
`Finally, the Commission discussed and rejected various constitutional
`considerations raised during the comment period, some of which Huawei
`advances here. Id. at 11457–65.18
`
`On January 3, 2020, the FCC published a summary of the USF Order
`in the Federal Register that provided for a thirty-day comment period on the
`
`
`
`16 The agency assumed the rule would prevent economic harm by thwarting attacks
`on national communications networks. 34 FCC Rcd. at 11465. Given a national GDP of
`$20.5 trillion in 2018 (and a growth rate of 2.9%), the agency estimated that preventing even
`a 0.005% disruption to the economy or a 0.162% disruption to annual growth would
`outweigh estimated costs. Ibid. Similarly, given the digital economy’s $1.35 trillion size,
`benefits would outweigh costs if the rule foiled a disruption of 0.072% of the digital
`economy. Id. These benefits were realistic, the FCC suggested, because malicious
`cyberactivity cost somewhere between $57 and $109 billion in 2016. Ibid. The FCC
`projected similar benefits from reducing identity theft. Id. at 11465–66. Moreover, the rule
`would produce additional benefits even harder to quantify, such as preventing threats to
`the national defense, public safety, homeland security, military readiness, and critical
`infrastructure. Id. at 11466.
`17 Costs would “not exceed $960 million” and were “likely to be much lower.” 34
`FCC Rcd. at 11465. The agency took the average cost of replacing Huawei/ZTE equipment
`(pegged at $40–$45 million based on estimates from seven carriers), multiplied by the
`number of firms using the equipment that “rely on universal service support,” but reduced
`to account for carriers’ decisions to use other funding to purchase or maintain the
`equipment. Id. at 11466–67. Based on a cost-stream estimate over twenty years and product
`price differential estimates of 10% and 25%, the FCC then estimated the lower and upper
`cost bounds as $160 million and $960 million, respectively. Id. at 11468–69. We consider
`the agency’s cost-benefit analysis in greater detail infra.
`18 In brief, the FCC rejected arguments that the USF Rule and its applications
`would violate the Fifth Amendment’s Due Process Clause, amount to an unconstitutional
`bill of attainder, and constitute a regulatory taking. 34 FCC Rcd. at 11457–65.
`
`9
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 10 Date Filed: 06/18/2021
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`No. 19-60896
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`initial designations of Huawei and ZTE.19 Huawei submitted comments
`arguing the Bureau should reject its initial designation.20 On June 30, 2020,
`the Bureau issued a “final designation” of Huawei as a company covered by
`the USF Rule, which was “effective immediately upon release.”21 Huawei
`appealed the Bureau’s determination to the full Commission a month later.
`On December 11, 2020, the FCC affirmed Huawei’s final designation.22
`
`Shortly after the USF Rule was published, Congress enacted related
`legislation, the Secure and Trusted Communications Networks Act of 2019,
`Pub. L. No. 116-124, 134 Stat. 158 (2020) (codified at 47 U.S.C. § 1601 et seq.)
`[hereinafter “Secure Networks Act” or “SNA”]. Among other things, the
`SNA directs the Commission to publish a list of “covered communications
`equipment or services”—specifically, those posing national security risks as
`determined by “any executive branch interagency body with appropriate
`national security expertise,” the Department of Commerce pursuant to
`Executive Order No. 13873, the 2019 NDAA, and/or “an appropriate
`national security agency.” § 1601(a), (c). The SNA bars using Commission-
`administered subsidies to obtain or maintain any covered equipment or
`service. § 1602(a).
`
`
`
`19 Final Rule in Supply Chain Rulemaking; Huawei Designation; ZTE Designation,
`85 Fed. Reg. 230-01 (Jan. 3, 2020) (to be codified at 47 C.F.R. pt. 54).
`20 Comments of Huawei Technologies Co., Ltd., and Huawei Technologies USA,
`Inc. on Supply Chain Rulemaking — Huawei Designation, PS Docket No. 19-351 (Feb. 3,
`2020).
`
`21 Designation Order in Supply Chain Rulemaking — Huawei Designation, PS
`Docket No. 19-351, 35 FCC Rcd. 6604, 2020 WL 3566005, at *23 (released June 30, 2020)
`[hereinafter Final Designation Order].
`22 FCC Memorandum Opinion and Order in Supply Chain Rulemaking — Huawei
`Designation, FCC 20-179, PS Docket No. 19-351, 2020 WL 7351129 (released Dec. 11,
`2020) [hereinafter Designation Affirmance].
`
`10
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 11 Date Filed: 06/18/2021
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`No. 19-60896
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`A few weeks after Huawei’s final designation, the FCC released a
`
`declaratory ruling “integrat[ing] provisions of the . . . [SNA] into [the
`Commission’s] existing supply chain rulemaking proceeding.”23 The
`Declaratory Ruling found the USF Order fulfilled the FCC’s duty under
`SNA § 3 to prohibit using Commission-administered subsidies to obtain
`covered equipment or services. Id. About six months later, on the same day
`it affirmed Huawei’s final designation, the FCC released a second report and
`order further integrating the SNA’s requirements into the supply chain
`rulemaking that began with the USF Order.24 Congress later amended the
`SNA via the Consolidated Appropriations Act of 2021 to incorporate the
`USF Rule’s definition of covered equipment and services for the purpose of
`reimbursing providers for replacing covered equipment or services.25
`
`Procedural History
`
`This case comes before us on Huawei’s petitions for review of the
`
`USF Order. See 47 U.S.C. § 402(a); 28 U.S.C. § 2342(1); see also Fed. R.
`App. P. 15(a); Alenco, 201 F.3d at 614.26 Huawei seeks review on the grounds
`that the Order (1) exceeded the FCC’s statutory authority; (2) was arbitrary,
`capricious, and an abuse of discretion under the APA; (3) was adopted in
`
`
`
`23 Declaratory Ruling and Second Further Notice of Proposed Rulemaking in
`Supply Chain Rulemaking, FCC 20-99, WC Docket No. 18-89, 2020 WL 4046643, at *1
`(released July 17, 2020).
`24 Second Report and Order in Supply Chain Rulemaking, FCC 20-176, WC
`Docket No. 18-89, 2020 WL 7351126 (released Dec. 11, 2020).
`25 Pub. L. No. 116-260, 134 Stat. 1182, 2120 (Dec. 27, 2020) (to be codified at 47
`U.S.C. § 1603).
`26 Both of Huawei’s petitions state they seek review of the entire document
`released on November 26, 2019, which included a Further Notice of Proposed Rulemaking
`and an Information Collection Order. But Huawei’s subsequent briefing addresses only the
`Report and Order (which we refer to collectively as the “USF Order”).
`
`11
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`No. 19-60896
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`violation of the notice-and-comment requirements of 5 U.S.C. § 553; (4) was
`void for vagueness and retroactive in violation of the Constitution and the
`APA; (5) violated the Constitution’s Appointments Clause and statutory and
`constitutional due process protections; and (6) was otherwise contrary to
`law. The parties’ briefing and oral arguments clarified that Huawei’s appeal
`presents independent challenges to two parts of the USF Order: the USF
`Rule and Huawei’s initial designation.
`
`As noted, the FCC affirmed Huawei’s final designation after oral
`
`argument in this case. Designation Affirmance, 2020 WL 7351129. Huawei
`timely petitioned for review of the final designation order. We granted a stay
`in that case pending disposition of this one.
`
`Standard of Review
`
`“The court of appeals . . . has exclusive jurisdiction to enjoin, set
`
`aside, suspend (in whole or in part), or to determine the validity of . . . all final
`orders of the Federal Communication Commission made reviewable by [47
`U.S.C. § 402(a)].” 28 U.S.C. § 2342. We review such orders in two ways.
`See Alenco, 201 F.3d at 614, 619.
`
`First, we consider whether the agency’s action exceeded its statutory
`
`authority under the Chevron framework. Acosta v. Hensel Phelps Constr. Co.,
`909 F.3d 723, 730 (5th Cir. 2018); see also Chevron U.S.A., Inc. v. Nat. Res.
`Def. Council, Inc., 467 U.S. 837, 842–44 (1984). At step one, we ask whether
`“Congress has directly spoken to the precise question at issue,” in which
`case we must “give effect to the unambiguously expressed intent of
`Congress” and reverse an agency’s interpretation that fails to conform to the
`statutory text. Alenco, 201 F.3d at 619 (quoting Chevron, 467 U.S. at 842–43);
`see also Sw. Elec. Power Co. v. EPA, 920 F.3d 999, 1024 (5th Cir. 2019) (“The
`question for the court [at step one] is whether the agency’s construction of
`the language is within the range of meanings that could be plausibly attributed
`
`12
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`No. 19-60896
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`to the relevant statutory language.” (quoting 1 Richard J. Pierce, Jr.,
`Administrative Law Treatise § 3.6, at 215 (5th ed. 2010))). We rely
`on “authoritative Supreme Court decisions” and “conventional standards of
`statutory interpretation,” looking to “text, structure, and the overall
`statutory scheme.” Chamber of Com. v. U.S. Dep’t of Lab., 885 F.3d 360, 369
`(5th Cir. 2018).
`
`If the statute is silent or ambiguous as to the specific issue, we proceed
`
`to step two and ask whether “the agency’s answer is based on a permissible
`construction of the statute.” Alenco, 201 F.3d at 619 (quoting Chevron, 467
`U.S. at 843). If the agency’s construction is “arbitrary, capricious, or
`manifestly contrary to the statute,” we reverse. Id. (quoting Chevron, 467
`U.S. at 844). But “[i]f a statute is ambiguous, and if the implementing
`agency’s construction is reasonable,” we defer to the agency’s construction.
`Acosta, 909 F.3d at 730 (quoting Elgin Nursing & Rehab. Ctr. v. U.S. Dep’t of
`Health & Hum. Servs., 713 F.3d 488, 492 n.3 (5th Cir. 2013)).
`
`Second, we will set aside agency action that is arbitrary and capricious,
`
`an abuse of discretion, or otherwise unlawful. 5 U.S.C. § 706(2)(A). Agencies
`“are required to engage in ‘reasoned decisionmaking.’” Sierra Club v. EPA,
`939 F.3d 649, 664 (5th Cir. 2019) (quoting Michigan v. EPA, 576 U.S. 743,
`750 (2015)); see also FCC v. Prometheus Radio Project, 141 S. Ct. 1150, 1158
`(2021) (“The APA’s arbitrary-and-capricious standard requires that agency
`action be reasonable and reasonably explained.”). “Not only must an
`agency’s decreed result be within the scope of its lawful authority, but the
`process by which it reaches that result must be logical and rational.”
`Michigan, 576 U.S. at 750 (quoting Allentown Mack Sales & Serv., Inc. v.
`NLRB, 522 U.S. 359, 374 (1998)). The agency must “articulate a satisfactory
`explanation for its action including a ‘rational connection between the facts
`found and the choice made.’” Sierra Club, 939 F.3d at 664 (quoting Motor
`Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).
`
`13
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`

`

`Case: 19-60896 Document: 00515905664 Page: 14 Date Filed: 06/18/2021
`
`No. 19-60896
`
`However, we cannot “substitute [our] judgment for that of the agency.” Id.
`(quoting 10 Ring Precision, Inc. v. Jones, 722 F.3d 711, 723 (5th Cir. 2013)).
`Our role is to determine whether the agency’s decision “was based on a
`consideration of the relevant factors and whether there has been a clear error
`of judgment.’” Id. (quoting State Farm, 463 U.S. at 43).
`
`We review constitutional issues de novo. Tex. Off. of Pub. Util. Couns.
`
`v. FCC, 183 F.3d 393, 419 n.34 (5th Cir. 1999) [hereinafter TOPUC I]; see also
`5 U.S.C. § 706.
`
`Discussion
`
`I. Ripeness
`
`The FCC contests the ripeness of Huawei’s challenges to the USF
`Rule and to the initial designation.27 The ripeness doctrine “prevent[s] the
`courts, through avoidance of premature adjudication, from entangling
`themselves in abstract disagreements over administrative policies.” Abbott
`Lab’ys v. Gardner, 387 U.S. 136, 148 (1967), overruled on other grounds,
`Califano v. Sanders, 430 U.S. 99 (1977). It also “protect[s] the agencies from
`judicial interference until an administrative decision has been formalized and
`its effects felt in a concrete way by the challenging parties.” Id. at 148–49.
`We apply a two-part test, balancing “the fitness of the issues for judicial
`decision” with “the hardship to the parties of withholding court
`consideration.” Id. at 149; see also Texas v. United States, 497 F.3d 491, 498
`(5th Cir. 2007).
`
`Here, the FCC originally argued that neither Huawei’s challenges to
`
`the USF Rule nor its challenges to the initial designation were ripe because
`
`
`
`27 We assess ripeness claim by claim. See John Corp. v. City of Houston, 214 F.3d
`573, 585–86 (5th Cir. 2000).
`
`14
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 15 Date Filed: 06/18/2021
`
`No. 19-60896
`
`Huawei’s asserted injuries—financial and reputational fallout from the
`“exclusion of its products from the federal USF program”—“w[ould] not
`materialize unless the Commission issue[d] a final designation of Huawei.”
`In other words, the FCC never disputed the rule’s fitness for review but only
`Huawei’s showing of hardship. Now that Huawei has received a final
`designation and the full Commission has affirmed it, making the rule
`conclusively effective against Huawei, the FCC cannot assert its challenges
`to the USF Rule are unripe.28
`
`By contrast, the initial designation is not ripe for review because it is
`
`not a final order and thus fails the fitness prong. See Abbott Lab’ys, 387 U.S.
`at 148–150 (considering finality of agency action in evaluating fitness); Texas,
`497 F.3d at 498–99 (same). We have authority to review only “final orders”
`of the FCC under the Hobbs Act, 28 U.S.C. § 2342(1). A Hobbs Act “final
`order” is analytically identical to “final agency action” under the APA, 5
`U.S.C. § 704. See US West Commc’ns, Inc. v. Hamilton, 224 F.3d 1049, 1055
`(9th Cir. 2000); Am. Trucking Ass’n, Inc. v. United States, 755 F.2d 1292, 1296
`(7th Cir. 1985). Agency action is “final” under § 704 if two conditions are
`met: (1) “the action must mark the consummation of the agency’s
`
`
`
`28 “[Ripeness] is ‘peculiarly a question of timing.’” Opulent Life Church v. City of
`Holly Springs, 697 F.3d 279, 286 (5th Cir. 2012) (quoting Reg’l Rail Reorganization Act
`Cases, 419 U.S. 102, 140 (1974)). Thus, we must evaluate it based on “the situation now
`rather than the situation” when the claims were first presented. Reg’l Rail Reorganization,
`419 U.S. at 142–43; see also DM Arbor Ct., Ltd. v. City of Houston, 988 F.3d 215, 219–20 (5th
`Cir. 2021). Huawei presented undisputed declaration testimony of “huge financial losses”
`and workforce reductions resulting from the mere threat of designation. The FCC does not
`dispute that these injuries include permanent loss of business from USF recipients who
`would have used those funds to purchase Huawei equipment and the loss of future
`contracts with USF recipients, injuries sufficient to establish hardship. See, e.g., Miss. Valley
`Gas Co. v. FERC, 659 F.2d 488, 498–99 (5th Cir. 1981) (FERC order ripe where it would
`have a “direct and immediate impact” by denying petitioner right to charge rates at agreed
`amount).
`
`15
`
`

`

`Case: 19-60896 Document: 00515905664 Page: 16 Date Filed: 06/18/2021
`
`No. 19-60896
`
`decisionmaking process”; and (2) it “must be one by which rights or
`obligati

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