The Biden administration is investigating Chinese telecoms equipment maker Huawei over concerns that U.S. cell towers fitted with its gear could capture sensitive information from military bases and missile silos that the company could then transmit to China, two people familiar with the matter said.

Authorities are concerned Huawei (HWT.UL) could obtain sensitive data on military drills and the readiness status of bases and personnel via the equipment, one of the people said, requesting anonymity because the investigation is confidential and involves national security.

The previously unreported probe was opened by the Commerce Department shortly after Joe Biden took office early last year, the sources said, following the implementation of rules to flesh out a May 2019 executive order that gave the agency the investigative authority.

The agency subpoenaed Huawei in April 2021 to learn the company's policy on sharing data with foreign parties that its equipment could capture from cell phones, including messages and geolocational data, according to the 10-page document seen by Reuters.

The Commerce Department said it could not "confirm or deny ongoing investigations." It added that: "protecting U.S. persons' safety and security against malign information collection is vital to protecting our economy and national security."

Huawei did not respond to a request for comment. The company has strongly denied U.S. government allegations that it could spy on U.S. customers and poses a national security threat.

The Chinese embassy in Washington did not respond to the specific allegations. In an emailed statement, it said: "The U.S. government abuses the concept of national security and state power to go all out to suppress Huawei and other Chinese telecommunications companies without providing any solid proof that they constitute a security threat to the U.S. and other countries."

Reuters could not determine what actions the agency might take against Huawei.

Eight current and former U.S. government officials said the probe reflects lingering national security concerns about the company, which was already hit with a slew of U.S. restrictions in recent years.

If the Commerce Department determines Huawei poses a national security threat, it could go beyond existing restrictions imposed by the Federal Communications Commission (FCC), the U.S. telecoms regulator.

Using broad new powers created by the Trump administration, the agency could ban all U.S. transactions with Huawei, demanding U.S. telecoms carriers that still rely on its gear quickly remove it, or face fines or other penalties, a number of lawyers, academics and former officials interviewed by Reuters said.

The FCC declined to comment.

U.S.-CHINA TECH WAR

Huawei has long been dogged by U.S. government allegations it could spy on U.S. customers, though authorities in Washington have made little evidence public. The company denies the allegations.

"If Chinese companies like Huawei are given unfettered access to our telecommunications infrastructure, they could collect any of your information that traverses their devices or networks," FBI Director Christopher Wray warned in a speech in 2020. "Worse still: They'd have no choice but to hand it over to the Chinese government, if asked."

Reuters could not determine if Huawei's equipment is capable of collecting that sort of sensitive information and providing it to China.

"If you can stick a receiver on a (cellphone) tower, you can collect signals and that means you can get intelligence. No intelligence agency would pass an opportunity like that," said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington D.C.-based think tank.

One move to address the perceived threat was a 2019 law and related rules forbidding U.S. companies from using federal subsidies to buy telecoms equipment from Huawei. It also tasked the FCC with compelling U.S. carriers that receive federal subsidies to purge their networks of Huawei equipment, in return for reimbursement.

But the so-called "rip and replace" deadline to remove and destroy Huawei equipment completely will not kick in until mid-2023 at the earliest, with additional opportunities for companies to seek extensions. And reimbursements will only reach 40% of the total requested for now.

TOWERS NEAR MISSILE SILOS

Cell towers equipped with Huawei gear that are close to sensitive military and intelligence sites have become a particular concern for U.S. authorities, according to the two sources and an FCC commissioner.

Brendan Carr, one of the FCC's five commissioners, said that cellphone towers around Montana's Malmstrom Air Force Base - one of three that oversee missile fields in the United States - ran on Huawei technology.

In an interview this week, he told Reuters there was a risk that data from smartphones obtained by Huawei could reveal troop movements near the sites: "There’s a very real concern that some of that technology could be used as an early warning system if there happened to be, God forbid, an ICBM missile strike."

Reuters was unable to determine the exact location or scope of Huawei equipment operating near military facilities. Individuals interviewed by Reuters pointed to at least two other likely cases in Nebraska and Wyoming.

Crystal Rhoades, a commissioner at Nebraska's telecoms regulator, has flagged to media the risk posed by the proximity of cell towers owned by Viaero to intercontinental ballistic missile (ICBM) silos in the western part of the state.

ICBMs carry nuclear warheads to targets thousands of miles away and are stored in underground silos near military bases. The Nebraska cell towers are near a missile field overseen by F.E. Warren Air Force Base in neighboring Wyoming.

Viaero provides mobile telephone and wireless broadband services to about 110,000 customers in the region. It said in a 2018 filing to the FCC opposing the commission's efforts at curbing Huawei's expansion that approximately 80% of its equipment was manufactured by the Chinese firm.

That gear could potentially enable Huawei to glean sensitive information about the sites, Rhoades told Reuters in June.

"An enemy state could potentially see when things are online, when things are offline, the level of security, how many people are on duty in any given building where there are really dangerous and sophisticated weapons," Rhoades said.

Rhoades said in July that she had not been updated on rip and replace efforts by Viaero in more than two years, despite requesting updated information from the company in recent weeks.

At the time of last contact, the company said it would not begin removal efforts until the FCC money became available.

The FCC advised companies on Monday how much of their funding requests it can reimburse.

Viaero did not respond to multiple requests for comment. Huawei also declined to comment.

In Wyoming, then CEO of rural carrier Union Wireless, John Woody, said in a 2018 interview with Reuters that the company's coverage area included ICBM silos near the F.E. Warren Air Force Base and that its equipment included Huawei switches, routers and cell sites.

Last month, Eric Woody, John's son and acting CEO, said "virtually all the Huawei gear Union purchased remains in our network." He declined to say whether the towers close to the sensitive military sites contain Huawei equipment.

F.E. Warren Air Force Base referred comment on the Huawei equipment to the Pentagon. The United States Strategic Command, which is responsible for nuclear operations, said in a statement to Reuters: "We maintain constant awareness of activities near our installations and sites." It noted that "any concerns are on a whole of government level" but declined to provide further details on what those concerns are.

NEW POWERS AGAINST FOREIGN ADVERSARIES

Rick Sofield, a former DOJ official in the national security division who reviewed telecoms transactions, said the Commerce Department probe could give additional bite to the FCC’s crackdown but there was nothing new in targeting Huawei.

"The U.S. government’s concerns regarding Huawei are widely known so any information or communications technology company that continues to use Huawei products is assuming the risk that the U.S. government will come knocking," said Sofield, who represents U.S. and foreign companies facing U.S. national security reviews. He said he has not worked for Huawei.

The Commerce Department is using authority granted in 2019 that allows it to ban or restrict transactions between U.S. firms and internet, telecom and tech companies from "foreign adversary" nations including Russia and China, according to the executive order and related rules.

The two sources familiar with the Huawei investigation and a former government official said Huawei was one of the Biden administration's first cases using the new powers, referred to Commerce in early 2021 by the Justice Department.

The Justice Department referred requests for comment by Reuters to Commerce.

The subpoena is dated April 13, 2021, the same day that Commerce announced a document request was sent to an unnamed Chinese company under the new powers.

It gives Huawei 30 days to provide seven years' worth of "records identifying Huawei's business transactions and relationships with foreign entities located outside of the United States, including foreign government agencies or parties, that have access to, or that share in any capacity, U.S. user data collected by Huawei."

Noting that the "focus of this investigation is the provisioning of mobile network and telecommunications equipment...by Huawei in the United States," it also asks Huawei for a complete catalog of "all types of equipment sold" to "any communications provider in the United States," including names and locations of the parties to the sale.