US Senate bill would reinstate crushing ban on ZTE if it doesn’t comply with terms of Donald Trump’s deal

Lawmakers threaten the Chinese telecoms giant with the same penalties that were lifted in July, when it was pulled back from the brink of collapse

PUBLISHED : Wednesday, 19 September, 2018, 3:43am
UPDATED : Wednesday, 19 September, 2018, 7:17am

A bipartisan group of US senators introduced legislation on Tuesday that would reimpose the crippling ban on Chinese telecommunications equipment giant ZTE if it violates terms of the deal it struck with the Trump administration.

The bill would reinstate a ban that prohibits ZTE from purchasing any American-made components, which are crucial to its products, for seven years if it violates any of the conditions of the deal, which had saved it from the brink of collapse.

Republican Senator Marco Rubio and Democratic Senator Chris Van Hollen co-sponsored the bill, called the ZTE Enforcement Review and Oversight (ZERO) Act. Other cosponsors were Republican Senators Susan Collins and James Lankford and Democratic Senators Mark Warner and Elizabeth Warren.

The bill comes amid a continuing global backlash against Chinese technology companies, including ZTE and Huawei, as governments accuse them of being national security threats.

The British government blacklisted ZTE at the same time as the US ban in April and has not loosened its grip. In recent weeks, Japan and Australia have also stopped the telecoms companies from providing 5G equipment in their countries.

Many American lawmakers have been vocal in their opposition to the deal Trump struck with ZTE in early June, which shifted the penalty to a hefty fine and prohibited US government entities from using its network gear, but allowed the company to again buy US components and resume operations.

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On Tuesday, Rubio said of the proposed legislation: “While it was a mistake to reach a ‘deal’ with ZTE in the first place, this bill will ensure ZTE is finally put out of business if it does not hold up its end of the bargain.

“With China’s communist government posing the greatest long-term threat to the United States, we must continue to confront ZTE’s real risks to our economy and national security.”

ZTE, the second largest telecoms equipment maker in China, was first fined in early 2017 for selling millions of dollars’ worth of hardware and software from US technology companies to Iran and North Korea, which were under American sanctions.

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The company was later found to have lied about the matter, which led the US Commerce Department this year to impose the seven-year ban.

The inability to buy components from US suppliers resulted in ZTE’s closing major operations within weeks. The company’s survival became a source of friction in trade talks between Washington and Beijing. Trump, in what he called a favour to Chinese President Xi Jinping, directed the Commerce Department to come up with alternative, less crippling punishment.

ZTE eventually agreed to pay a total of US$1.4 billion in fines and escrow funds, appoint a new board of directors and install compliance oversight managers chosen by the US, and the ban was lifted on July 13. The only punishment specified in case of future violations was the loss of the US$400 million in escrow.

Van Hollen said in a statement on Tuesday: “At the bare minimum, Congress must act to ensure that this giant telecommunications company is not able to violate the current agreement with the Department of Commerce or our laws. This bipartisan legislation will hold ZTE’s feet to the fire and should be considered without delay.”