FCC Adopts Expansive New Foreign Adversary Reporting Requirements in Latest Order

Key Takeaways:

• The FCC adopted a Foreign Adversary Report & Order imposing broad new ownership reporting requirements. Holders of FCC authorizations must certify or report whether they are “owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.” Reporting is required based on three categories or “schedules” of licenses.
• “Foreign adversary” countries, as determined by the Department of Commerce, currently include: China, Hong Kong, Macau, Cuba, Iran, Korea, Russia and the Venezuelan Maduro Regime.
• This information will be made publicly available. The FCC has not indicated whether or for what purposes it may use this data.

The Foreign Adversary Report and Order (Foreign Adversary R&O) aims to increase transparency of foreign adversary ownership in Commission regulatees and enhance the Federal Communications Commission’s (FCC or Commission) ability to “assess and protect the U.S. against emerging national security threats.” FCC regulatees will be required to certify whether they are “owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.” The FCC identifies three “schedules” or categories of authorization holders, each of which are subject to different reporting requirements:

Schedule A applies to regulatees that provide “essential services upon which the entire communications ecosystem depends” and “serve as the backbone of the nation’s communications networks.” Regulatees subject to Schedule A will be required to submit “an attestation either affirming or denying Foreign Adversary Control.” Schedule A applies to:

• Holders of geographic-area wireless licenses capable of 4G or 5G mobile broadband service.
• Regulatees with pending or granted foreign ownership declaratory rulings.
• Holders of domestic and international Section 214 authorizations.
• Holders of equipment authorization certifications.
• Broadcast and cable television relay service station licensees with more than six employees.
• Submarine cable landing licensees.
• Space and earth station authorization holders.

Schedule B applies to regulatees that “operate in markets or provide services where knowledge of the presence of Foreign Adversary Control would be critical to the Commission’s oversight and protection of the nation’s communications networks.” Schedule B regulatees “must make a definitive attestation only if they are subject to Foreign Adversary Control.” Schedule B applies to:

• All site-based wireless licensees.
• Geographic-area wireless licensees for services that do not have sufficient capacity to support broadband, that may not provide mobile service, and that are not exclusive use or are individually licensed.
• Mandatory Antenna Structure Registration (ASR) tower owners.
• Broadcast/cable television relay service station licensees with less than six employees.

Schedule C applies to regulatees the Commission deems unlikely to be subject to Foreign Adversary Control, that have a minimal role in the nation’s communications networks, or that adequately provide information about ownership through other reporting obligations. Schedule C regulatees are “exempt from initially attesting as to whether or not they are subject to Foreign Adversary Control.” Schedule C applies to:

• Amateur Radio Service licensees.
• Voluntary ASR tower owners.
• Ship and Aircraft licensees.
• General Mobile Radio Service licensees.
• Individual authorization holders to operate stations by rule in the Ship, Aircraft and Personal Radio Services.
• Commercial radio operator licensees.
• Holders of a Supplier’s Declaration of Conformity authorization.¹

Definitions. The Foreign Adversary R&O also adopts expansive definitions for “foreign adversary,” “foreign adversary country” and “owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary.”

• “Foreign Adversary” is defined as “any foreign government or foreign non-government person determined by the Secretary of Commerce . . . to have engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons . . . .”
• “Foreign Adversary Country” is defined as: (1) the People’s Republic China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region; (2) the Republic of Cuba; (3) Islamic Republic of Iran; (4) the Democratic People’s Republic of Korea; (5) the Russian Federation; and (6) Venezuelan politician Nicolás Maduro (Maduro Regime).
• “Owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary” is defined as any individual or entity that:
  • Acts in any capacity at the order, request, or under the direction or control of a foreign adversary, or whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized in whole or in majority part by a foreign adversary.
  • Is a citizen of a foreign adversary or a country controlled by a foreign adversary, and is not a United States citizen or permanent resident of the United States.
  • Has a principal place of business in, or is headquartered in, incorporated in or otherwise organized under the laws of a foreign adversary or a country controlled by a foreign adversary.
  • Is owned or controlled by a foreign adversary—including any identified in the above three paragraphs of this section—which possesses power to determine, direct or decide important matters affecting an entity. “Power” can be “direct or indirect, whether or not exercised, through the ownership of a majority or a dominant minority (10% or greater) of the total outstanding voting interest and/or equity interest, or through a controlling interest” in a variety of business arrangements, such as board representation, proxy voting or contractual agreements.

Ongoing Disclosure Requirements. If a regulatee attests that it is owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary, the regulatee will be subject to additional disclosure requirements. This includes a requirement to disclose all 5% or greater direct or indirect equity and/or voting interests, along with specific identifying information about the equity and voting interests, as well as the nature of control.

Regulatees must also make new attestations and additional disclosures after the initial attestation in certain circumstances. This includes where an entity: (1) holds a Schedule A or B authorization and is newly subjected to Foreign Adversary Control; (2) holds an authorization that is newly designated in Schedule A; (3) holds a Schedule A or B authorization and undergoes certain covered changes (e.g., regulatees subject to foreign adversary control become aware of changes to disclosable direct or indirect ownership interests, or an entity that previously certified it was subject to foreign adversary control is no longer subject to such control); and (4) seeks to modify, seeks to transfer/assign or apply for a new Schedule A or B authorization.

FACS Submission Database. The Commission will create a Foreign Adversary Control System (FACS) to collect the information, which will be generally available to the public. The Foreign Adversary R&O directs the Office of Economics and Analytics (OEA) and Public Safety and Homeland Security Bureau (PSHSB) to announce when the FACS database has been created as well as the opening of the filing windows, as discussed in more detail below.

Timeline. Although the rules adopted in the Foreign Adversary R&O will become effective 60 days after publication in the Federal Register, compliance with the attestation and disclosure requirements will not be required until the Office of Management and Budget completes its review of the new or modified information collections associated with those rules. Regulatees required to submit initial attestations will be required to do so within 60 days after OEA and PSHSB release the public notice announcing the compliance deadlines.

Enforcement Procedures. The Commission also adopted enforcement mechanisms to address late and nonresponsive filers as well as incomplete or inaccurate responses. Regulatees should begin to familiarize themselves with the relevant requirements to avoid possible enforcement actions.

Takeaways

Entities that are or believe that they will be subject to the Commission’s new rules adopted in the Foreign Adversary R&O should be proactive in determining which attestation and disclosure requirements are applicable. Bear in mind that the reporting obligations apply to the type of authorization held and an entity that holds multiple authorizations must determine its obligation for each type of license that it holds. Entities that are unsure whether they are required to disclose certain foreign ownership should be proactive in consulting with counsel to determine the best advocacy strategy since the FCC is requiring entities to disclose all foreign ownership even when the new requirements may not be applicable.

This action signifies the FCC’s commitment to maintaining the security and integrity of the nation’s communications networks. The Foreign Adversary R&O is among the most recent Commission actions focused on national security, including updates on: (1) “Bad Lab” rules; (2) submarine cable rules; and (3) inclusion of foreign-produced uncrewed aircraft systems on the Covered List.

Please do not hesitate to reach out if you would like additional information on the new rules or have any questions.

^{1 The complete list of Covered Authorizations subject to the FCC’s new foreign adversary control rules will be set forth in 47 C.F.R. § 1.80002 once codified and can be found in Appendix A to the Foreign Adversary Control R&O.}