Senators move to reinstate ZTE ban as Department of Commerce said ZTE must replace its entire board of directors within the next 30 days

Adding a new wrinkle to the ZTE saga, a bipartisan group of senators is trying to reinstate the ban on the Chinese vendor in spite of a Trump administration deal with the company. Meanwhile, the Department of Commerce says the seven-year export ban on ZTE stays in place until the firm pays a $1 billion fine and places an additional $400 million in escrow in a U.S.-approved bank.

According to reports from NPR and The Wall Street Journal, an amendment to the National Defense Authorization Act, sponsored by Senators Tom Cotton (R-Ark.), Chris Van Hollen (D-Md.) and Chuck Schumer (D-N.Y.), would reinstate the ban on ZTE buying components from U.S. tech companies such as Qualcomm. The amendment was passed despite Commerce Secretary Wilbur Ross lobbying against it, according to published reports, and sets up for a vote this week.

Under the current terms of the agreement between the U.S. and ZTE, the Chinese company must replace the boards of directors of two corporate entities (ZTE Corp. and ZTE Kangxun) within the next 30 days.

Additionally, all members of the company’s leadership at or above the senior vice president level also must be terminated, as well as any executive or officer tied to the export violations which led to the U.S sanctions. ZTE has five executive vice presidents and more than 12 senior vice presidents, China South Morning Post reported, citing a person familiar with the company’s management

That seven-year ban was imposed by the department’s Bureau of Industry and Security in March, after the vendor allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea. In early May, ZTE said it had ceased its major operating activities due to the export ban.

ZTE is also required to hire a team of “special compliance coordinators” that will be chosen by BIS and answerable to the U.S. agency, not ZTE. For 10 years, those compliance coordinators will “monitor on a real-time basis ZTE’s compliance with U.S. export control laws,” according to the Commerce Department, adding that embedding such personnel with the company means that it will be able to identify and respond to violations faster. This compliance team will be fully funded by the vendor.

Earlier this week, White House trade adviser Peter Navarro said that the U.S government will “shut down” ZTE in the United States if the firm engages in one more violation of U.S. trade rules.

“It’s going to be three strikes you’re out, on ZTE. If they do one more additional thing, they will be shut down,” Navarro said during an interview with Fox.

Navarro also said that President Donald Trump’s decision to allow ZTE to continue operating in the United States was a gesture to help build goodwill with the Chinese government.

However, the deal with ZTE obviously faces challenges, with some lawmakers saying that putting the company out of business is the appropriate response.

Politico quoted GOP Senator Cotton as saying that “I and obviously every other senator believes the death penalty is the appropriate punishment for their behavior. They’re a repeat bad actor that should be put out of business. For eight years, ZTE was able to run wild and be able to become the fourth-largest telecom company in the world.”

 

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