US may place compliance officers in ZTE’s offices, Wilbur Ross says after bill punishing the company passes the House

The bill bans US government agencies from using technology made by ZTE and would prohibit the Department of Defence from renewing contracts with vendors that work with ZTE

PUBLISHED : Friday, 25 May, 2018, 1:12am
UPDATED : Friday, 25 May, 2018, 11:04pm

US Commerce Secretary Wilbur Ross announced that the White House was considering options other than placing crippling penalties on Chinese telecom manufacturer ZTE Corp. on Thursday, hours after the House of Representatives passed a bill to punish the company in the new annual defence policy bill.

The US is considering a plan to require compliance officers to be installed at ZTE, Ross told CNBC. “If we do decide to go forward with an alternative, what it literally would involve would be implanting people of our choosing into the company to constitute a compliance unit,” he said.

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These officers would “report back to the Department of Commerce", he said. "The whole key is enforcement."

Earlier on Thursday, the House of Representatives passed a bill banning US government agencies from using technology made by ZTE and would prohibit the Department of Defence from renewing contracts with vendors that work with ZTE.

The bill, “The National Defense Authorization Act for Fiscal Year 2019”, passed on a 351-66 vote.

It states that national security concerns have accompanied the dramatic growth of China’s telecom sector, “particularly those ‘national champions’ prominent in China’s ‘going out’ strategy of overseas expansion”.

The measures also would apply to another Chinese company, Huawei, and must be passed by the Senate and signed by US President Donald Trump before they come into effect.

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The bill marks the latest resistance from Congress against Trump’s softening stance on ZTE.

The Banking Committee approved an amendment in a bill on Tuesday that would prevent Trump from easing any punitive measures without first certifying to Congress that ZTE was complying with US law.

Separately, 27 senators – including Republicans John Cornyn of Texas and Marco Rubio of Florida, and Democrats Chuck Schumer of New York and Dianne Feinstein of California – signed a letter to say that China’s policies and practices are “designed to strengthen its own national security innovation base, and essential tools of efforts to spread China’s influence in other countries”.

ZTE came in the spotlight in April on the backdrop of trade disputes between the US and China. In April, the US prohibited American companies from selling their components to the company for seven years after ZTE breaches US sanctions and sold products to Iran and North Korea.

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The ban caused ZTE, one of the largest telecom equipment makers in the world, to shut all of its major operations.

The Shenzhen, China-based company depends on US components such as silicon chips from Qualcomm to build its products.

But in a surprise tweet on May 13, Trump said he had asked the Commerce Department to help ZTE back into business. Since then, congressional objections on rolling back on penalties have been escalating.

Trump has said he “envisions” a revised penalty for the company, including a requirement that it appoint a new board of directors and pay a “very large fine” of perhaps US$1.3 billion.

The defence policy bill passed Thursday is HR 5515.