US Senators Seek Punishment if China’s ZTE Violates Deal

September 19, 2018 Updated: September 19, 2018

WASHINGTON–Republican and Democratic U.S. senators introduced a bill on Sept. 18 that would reimpose sanctions on China’s ZTE if it does not fully comply with U.S. laws and an agreement with the Trump administration that ended stiff restrictions on the telecommunications equipment company.

In July, President Donald Trump decided to lift a ban on U.S. companies selling to ZTE, allowing the giant company to resume business. The ban was imposed in April when ZTE was found guilty of making false statements about disciplining 35 employees as part of an agreement after it pleaded guilty last year to violating U.S. sanctions. ZTE had illegally shipped U.S. goods and technology made with ZTE components to Iran.

Trump’s deal in exchange for the ban lift involves ZTE paying a $1.4 billion fine, with $400 million in escrow, in addition to changing the company’s leadership and allowing a team of U.S. compliance monitors to be installed inside the company for 10 years.

Lawmakers have introduced several pieces of legislation since Trump lifted the ban in July that seek to clamp down on the company, China’s second largest telecommunications equipment maker. Most have failed to advance in the face of administration opposition.

Senate aides said they thought the latest measure—led by Republican Senator Marco Rubio and Democrat Chris Van Hollen, and focused on adherence to an agreement reached by Trump’s Commerce Department—would get support from congressional leadership.

Senate aides said the purpose of the bill was to make it clear to the administration that Congress wants a strong response if ZTE violates the deal. Many members of Congress view the Chinese firm as a national security threat, worrying that the use of its technology in the United States could make it easier for China to steal secrets.

Among other things, the legislation, introduced by three Republicans and three Democrats, would require reports from the Commerce Department every 90 days on ZTE’s compliance with the agreement and sharing with congressional committees ZTE audits conducted under the agreement.

If ZTE is not in compliance, it would face stiff penalties, including paying the $400 million in escrow.

“This bipartisan legislation would ensure that if ZTE once again violates trade restrictions or its agreement with the U.S., it will be held accountable in a significant, painful way,” said Senator Mark Warner, the top Democrat on the Senate Intelligence Committee and a co-sponsor of the bill.

By  Patricia Zengerle