Trump administration presents Capitol Hill with deal to rescue Chinese firm ZTE
The Trump administration has reached a deal that will put Chinese telecommunications giant ZTE back in business by rolling back severe sanctions put in place last month by the Commerce Department, according to a source familiar with the matter.
The move to settle with the Chinese company removes a major barrier to U.S.-China trade talks as Beijing opposed a penalty that would have shuttered the firm by prohibiting U.S. suppliers from doing business with ZTE for seven years.
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It also comes a week before Commerce Secretary Wilbur Ross is scheduled to travel to Beijing to continue efforts to negotiate a trade truce between the two countries.
Commerce notified officials on Capitol Hill of a deal, which will have ZTE pay a bigger fine, hire American compliance officers and replace the firm’s current management team, the source said.
Once those terms are met, the U.S. will lift a denial order, allowing ZTE to start doing business with American companies again, the source said.
President Donald Trump appeared to confirm the outlines of the deal on Twitter on Friday evening when he said that he had shut down the company but “let it reopen” after a series of changes.
“I closed it down then let it reopen with high level security guarantees, change of management and board, must purchase U.S. parts and pay a $1.3 Billion fine,” Trump tweeted.
He also blamed Democrats for letting ZTE “flourish with no security checks.” The Obama administration had flagged the company for violating U.S. sanctions law but created a temporary license that allowed it to continue doing business with U.S. suppliers, which the Trump administration also extended last year.
News of a deal brought quick condemnation from lawmakers on both sides of the aisle. Many on Capitol Hill view the action as a sign of weakness against China, especially as the administration tries to take Beijing to task over policies it says have robbed U.S. companies of sensitive technology.
“Yes they have a deal in mind. It is a great deal… for #ZTE & China,” Sen. Marco Rubio (R-Fla.) tweeted. “#China crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us. Many hoped this time would be different. Now congress will need to act.”
Senate Minority Leader Chuck Schumer said the deal as reported “would be helping make China great again.“
“Both parties in Congress should come together to stop this deal in its tracks,” he said in a statement Friday.
The Senate Banking Committee approved an amendment Tuesday that would bar the president from modifying any civil penalties against “Chinese telecommunications companies” unless he could certify that the company has not violated U.S. law in the past year and is fully cooperating with an investigation. That action follows a similar measure approved by a House panel last week.
The deal between the administration and ZTE largely follows elements shared publicly by Trump and other senior officials this week.
”What I envision is a very large fine of more than a billion dollars,” Trump told reporters at the White House on Tuesday. “Could be a billion-three. I envision a new management, a new board and very, very strict security rules. And I also envision that they will have to buy a big percentage of their parts and equipment from American companies.”
ZTE had already been hit with $1.19 billion in fines announced last year, following a two-year Obama administration investigation. The company was initially penalized for violating U.S. sanctions on Iran and North Korea by supplying those countries with telecommunications equipment containing U.S. parts.
Ross announced the seven-year ban would be put in place after ZTE violated the terms of deal that suspended the denial order in exchange for the company following a strict compliance plan.