Huawei Sues US Government Over NDAA Ban

By Charles Rollet, Published Mar 07, 2019, 09:23am EST

Chinese telecom giant Huawei is suing the US government over the NDAA ban, arguing that key provisions in it are unconstitutional.

NDAA Section 889 is poised to have a monumental impact on the video surveillance industry as it bans US governmental use and funding for Dahua, Hikvision, and Huawei offerings. Dahua and Hikvision are the two largest suppliers globally of video surveillance while Huawei, through its Hisilicon subsidiary is the largest supplier of chips for video surveillance cameras.

huawei sues us govt 2

However, if Huawei is successful in its lawsuit against the US government, however unlikely, it would significantly impact the NDAA's implementation and impact on the video surveillance industry.

In this post, we examine the video surveillance implications of Huawei’s lawsuit, including:

  • What impact does Huawei's lawsuit have on Dahua and Hikvision?
  • How would Huawei Hisilicon chips be impacted by the lawsuit?
  • What is the timing of this lawsuit vs the ban's implementation?
  • What is Huawei's case against the US government?
  • What Huawei has been doing to counter the US government's legislation and actions?

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Poll / ****

Comments (12)

One important theme to consider with Huawei's lawsuit against the US goverment is the opposite of that, a US company suing the Chinese government is impossible.

The point has been made by various people and this Bloomberg opinion piece is a good summary of it: 

The telecom company’s publicity campaign has taken advantage of rights and freedoms that aren’t available in its home country.

Western companies are understandably terrified of upsetting the PRC government because they know the retribution that PRC will measure.

Even tiny things, e.g., this week, a US makeup company posted an ad that did not show Taiwan as part of the PRC (which it obviously is not):

This resulted in a fairly typical uproar inside the PRC and the US company scrambled to apologize: 

Ironically, MAC left out Hawaii and Alaska from the US map but no apologies were given since none were needed as the US is not so thin-skinned.

The whole map incident, from a typical Western perspective, may seem comical, but Western companies can be banned from China from such 'offenses'.

An important contrast to keep in mind. 

Will anyone stand up for the Western video surveillance manufacturers that have effectively been banned inside of China for years? 

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Will anyone stand up for the Western video surveillance manufacturers that have effectively been banned inside of China for years?

though ironically, Western video surveillance manufacturing inside China is encouraged ;)

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Not only 'encouraged' it is effectively mandatory to have any shot at any projects, even though foreign sales are so low.

Imagine the US had that type of practice...

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I can imagine that, and in fact I find it wrong that the U.S. government isn't in pretty much unanimous agreement that the rules should be almost exactly the same on both sides.  The only exceptions should be in order to keep trade deficits/surpluses to a minimum, if at all possible.

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Agreed. As a matter of fact, a lot of government projects favor of western surveillance products, such as Beijing, Shanghai airports, and even some top level governmental buildings.

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a lot of government projects favor

Since the description is imprecise ('lot', 'favor'), I can't say I agree or disagree.

However, in terms of reported revenue, sales of Western video surveillance is minuscule inside of China compared to Chinese brands and has been for years (e.g., Dahua and Hikvision claim $7+ billion annual sales inside China, Avigilon basically nothing and Axis not much more than that).

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Even in e-Sports Blizzard must say "Chinese-Taipei" for one of the teams in the Overwatch League. It costs 20 million USD to register a team.

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I personal think Huawei has taken the position any publicity is Good for marketing. Rumors circling in other Asian groups are saying Huawei has increased cellphone market share in China and other parts of the world, physiological  people who had never believed in Huawei products will simply think if US is banning them it means their have better skills.  

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people who had never believed in Huawei products will simply think if US is banning them it means their have better skills.

Might be. I've heard the theory that the lawsuit is meant to bolster their reputation in regions that are more anti-US. 

For example, China's Foreign Minister praised the Huawei USA lawsuit, which might strengthen their brand inside of China. 

It's an obviously polarizing move for a product manufacturer. If you contrast to what Hikvision has done in the last year, by largely publicly being quiet, it is somewhat of a mirror opposite.

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Update: Huawei and the US have agreed on a timetable for the lawsuit over the summer with arguments occurring in September:

The law is still scheduled to go into effect in August.

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Update: Huawei lost, final judgement May 2020.

The Court explains its ruling in this 57-page memorandum.

A few excerpts on the Court's logic here:

The legislature did not put Huawei on trial or prevent it from having representation during a trial. Finally, the legislature did not make a determination of guilt. Congress did, in fact, hold hearings regarding the bill and there were findings included in the initial House and Senate bills. But hearings and findings are a permissible way for Congress to regulate conduct.

Although Huawei argues that this is a permanent ban, it is not. As an initial matter, there is a waiver provision contained in Section 889 permitting the Director of National Intelligence (“DNI”) to, in the national security interest of the United States, waive the prohibitions in Section 889.

Section 889 is part of the 2019 NDAA, which is a yearly appropriations law. Thus, anything Huawei does after the enactment of Section 889 can be taken into account in terms of the prohibition on Huawei products

Here, the HPSCI identified that Huawei and ZTE are the “two largest Chinese-founded, Chinese-owned telecommunications companies seeking to market critical network equipment to the United States.” (Dkt. #34, Exhibit 2 at p. 14). The HPSCI made the conscious decision to “focus first on the largest perceived vulnerabilities, with an expectation that the conclusion of this investigation would inform how to view the potential threat to the supply chain from other companies or manufacturers operating in China and other countries.”

Notably, Section 889 leaves open the possibility of designating additional companies to be subject to the prohibitions identified in the statute based on the recommendation of the DNI or the Director of the FBI.

Section 889 tailors the covered equipment to the types of technology that pose a risk of being disrupted by “hostile actors” who engage in cyber-attacks and -espionage.

By preventing federal grant and loan recipients from using federal funds to purchase the covered equipment, Congress sought to diversify the market. Moreover, the prohibition on grant and loan funds is also tailored to the ancillary purpose of ensuring that federal funds are not used to support products that pose cyber-threats to the federal government—a logical measure

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