White House to block Congress from stopping ZTE deal

Erika Holt
June 14, 2018

But the ban on buying US parts, imposed by the department in April, will not be lifted until the company pays the fine and places $400 million more in escrow in a USA -approved bank, the agency said.

Shares in ZTE Corp. fell 42 percent Tuesday in Hong Kong on their first trading day after the Chinese telecoms equipment maker agreed to pay a $1 billion United States penalty to the USA government and replace its top managers. In April, the White House announced a seven-year ban on the company buying US parts after it said the company violated USA sanctions on trade with Tehran and Pyongyang.

All members of its leadership at or above the senior vice president level would be removed within the 30-day period, with a commitment that they would not be rehired, along with any executives or officers tied to the wrongdoing, it said.

Senators in support of the original deal also think that it is unrealistic for US officials to police ZTE's future actions, as the Chinese company could still conduct improper business even under a watchful eye.

The U.S. Commerce Department can exercise discretion in granting exceptions.

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Cotton called ZTE a "repeat bad actor that should be put out of business", adding: "I and obviously every other senator believes the death penalty is the appropriate punishment for their behaviour". The department also will select a monitor, known as a special compliance coordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years.

The fear among USA intelligence agencies is that Chinese telecom equipment makers such as ZTE and Huawei pose a threat to national security, with even leaders of organisations including the NSA and Federal Bureau of Investigation concerned that ZTE and Huawei could be using their devices and equipment to spy on Americans.

Hong Kong's benchmark Hang Seng index was down 0.6 per cent by the midday break.

ZTE also said in filings on Tuesday that it would work to resume operations as soon as possible after the ban gets lifted, and would republish its first-quarter financial results after assessing the impact of the ban and the settlement agreement. This issue has become one of the key problems in a trade war between the two countries.

ZTE, which is based in Shenzhen, is China's second biggest telecoms maker. In addition, within 180 days, ZTE must post calculations of the USA components in its products on its website in Chinese and English.

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