The US Court of Appeals for the Fifth Circuit ruled Friday against Chinese telecom provider Huawei’s plea to vacate a rule by the Federal Communications Commission (FCC). Under the rule, FCC designated Huawei and its American affiliate as a “national security risk.” The rule barred recipients of subsidies from the federal government from using the funds to buy equipment or services from companies designated “national security risks.”

In response to Huawei’s challenge to the competence of the commission, the court ruled that FCC was well within its rights to designate Huawei as a security risk and to bar Universal Service Funds recipients from buying its equipment and services.

Huawei also argued that the rule would be arbitrary under the APA for being “vague and standardless,” and that it would violate covered companies’ due process rights. The court rejected these claims and held that an agency’s adoption of such a standard is not “necessarily arbitrary and capricious.”

The federal court denied the petition by concluding;

Huawei fails to demonstrate the initial designation would stigmatize an initially designated company’s reputation in connection with a “‘more tangible’ interest” as our precedents require to show a constitutionally protected reputational interest in pre-deprivation process. Accordingly, we do not find the rule must be vacated, either because it rests on a mistaken view of the law or because it fails to provide constitutionally required due process.