US senators urge keeping ZTE ban in a bid to block a deal by Trump

Lawmakers seek a defence-bill amendment to punish the Chinese telecoms firm after Commerce Department says a less-harsh deal is almost in place

PUBLISHED : Friday, 13 July, 2018, 5:15am
UPDATED : Friday, 13 July, 2018, 4:55pm

A bipartisan group of six US senators urged their colleagues now drawing up a final defence appropriations bill to retain a ban on selling components to Chinese telecoms giant ZTE Corp, a day after the US Commerce Department said a deal was close with the company to lift the ban.

Republicans Marco Rubio, Tom Cotton and Roy Blunt, together with Democrats Chris Van Hollen, Mark Warner and Bill Nelson sent a letter to the Senate and House Armed Services Committees on Thursday to urge the chairmen, Senator John McCain and Representative Mac Thornberry, to include the amendment in the defence bill.

“We strongly oppose the June 2018 deal with ZTE negotiated by the Commerce Department’s Bureau of Industry and Security (BIS) to lift the seven-year ban against the export of US parts and components to ZTE,” the senators wrote.

ZTE clears another hurdle with escrow agreement, ban still in place

They expressed concerns that ZTE – along with Huawei, another telecoms giant – “are beholden to the Chinese government and Communist Party, which provides the capacity for espionage and intellectual property theft, and therefore poses clear threats to the national security, people, and economy of the United States”.

The resistance adds yet another wrinkle to a deal that Commerce struck last month to save ZTE, after US President Donald Trump directed the department to come up with an alternative to the seven-year ban, framing it as a favour to his Chinese counterpart Xi Jinping and part of a larger strategy to win trade concessions.

On Wednesday, Commerce said in a statement that it had signed an agreement for ZTE to deposit US$400 million into an escrow account, the last step before the ban can be lifted. Additionally, ZTE paid a US$1 billion fine to the US Treasury last month.

ZTE’s new management looks to new era and sets compliance as priority

The settlement also required ZTE to replace its senior management team and put in place a compliance team appointed by the US.

ZTE shares jumped 25 per cent on the Hong Kong stock exchange on Thursday.

The company has been in a months-long effort to resume operations after the US banned it in mid-April from buying American parts, penalising ZTE for violating US sanctions by selling products to Iran and North Korea. The company shut down most its operations weeks after the ban was imposed.

After Trump instructed Commerce to devise a less-harsh penalty, the action met with bipartisan resistance in Congress, with lawmakers urging Trump to reinstate the ban because of the national security threat they said ZTE poses.

The US House and Senate have each passed amendments to their defence bills that would roll back Trump’s settlement.

An amendment restoring the ban was passed by the Senate. A few weeks later, the House of Representatives passed its own version that would allow ZTE to continue using US suppliers, but would bar ZTE from selling its products and services to US government agencies.

The Senate and the House are in the process of reconciling the differences between the two versions. The lawmakers intend to have the final version ready by the end of the month before the House goes into recess.