- The U.S. Federal Communications Commission (FCC) has officially designated Huawei and ZTE national security threats.
- U.S. carriers cannot use an $8.3 billion government subsidy program, known as the Universal Service Fund, to purchase, maintain or support any equipment or services from both vendors.
- Critics of Huawei and ZTE have claimed that their networking equipment could be used by China for espionage.
The U.S. Federal Communications Commission (FCC) has officially designated Huawei and ZTE national security threats.
That means that companies cannot use an $8.3 billion government subsidy program, known as the Universal Service Fund, to purchase, maintain or support any equipment or services from the two Chinese telecommunications giants.
"With today's Orders, and based on the overwhelming weight of evidence, the (FCC's Public Safety and Homeland Security) Bureau has designated Huawei and ZTE as national security risks to America's communications networks—and to our 5G future," FCC Chairman Ajit Pai said in a statement.
The ruling formalizes a unanimous FCC vote in November in which the regulator declared both Chinese companies as national security risks.
Huawei and ZTE did not respond to a request for comment when contacted by CNBC.
Washington's latest move is another blow to Huawei and ZTE, building on the country's larger campaign over the past 18 months against both Chinese companies. Last year, Huawei was put on a U.S. blacklist called the Entity List and a new rule in May aimed to cut the technology giant off from key semiconductor supplies.
The Trump administration has also been trying to convince other countries to block Huawei from the rollout of their 5G networks. Countries like Australia and Japan have followed suit. India is also reportedly weighing whether to bar Huawei amid broader geopolitical tensions with China. However, others nations like the U.K. have defied the U.S., granting Huawei a limited role in its 5G rollout.
5G refers to next-generation mobile networks that promise super-fast data speeds. But they're seen as even more important than previous generations of networks because of their potential ability to underpin critical infrastructure.
Critics of Huawei and ZTE have claimed that their networking equipment could be used by Beijing for espionage.
"Both companies have close ties to the Chinese Communist Party and China's military apparatus, and both companies are broadly subject to Chinese law obligating them to cooperate with the country's intelligence services," Pai said.
The FCC chairman was referring to a national security law in China that appears to compel companies to hand over data to the government if requested to do so.
Huawei has repeatedly said that it would never hand data to Beijing.
"We cannot and will not allow the Chinese Communist Party to exploit network vulnerabilities and compromise our critical communications infrastructure," Pai added.