Friday, 17 August, 2018

Senators Move To Reverse Trump's Deal Lifting Sanctions On China's ZTE

A woman stands outside a building of ZTE Beijing research and development center in Beijing A woman stands outside a building of ZTE Beijing research and development center in Beijing China
Deanna Wagner | 13 June, 2018, 09:10

For days, senators have scrambled to block the deal, all as the Trump administration has scrambled to undercut those efforts.

White House trade adviser Peter Navarro said on Sunday that President Donald Trump agreed to lift the ban as a personal favour to the president of China.

Confirming details of the agreement publicized by the US government on Monday, ZTE said it would replace its board of directors and that of its import-export subsidiary ZTE Kangxun within 30 days of the June 8 order being signed by the United States.

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 re-hired, along with any executives or officers tied to the wrongdoing, it said.

On June 1, Reuters exclusively reported on the monetary penalty and other terms demanded to reverse the ban. That version prevents the government from purchasing ZTE and Huawei products - but doesn't reimpose the sanctions-related restrictions lifted under Trump's deal.

Earlier this year, United States officials banned ZTE from working with U.S. companies - a move brought on by revelations that the company shipped US-made parts to Iran and North Korea and then lied about giving company executives involved with the deals large bonuses.

"ZTE should have a significant loss in FY18E due to the penalty in addition to near-term operational challenges due to management change and increased overseas growth uncertainties", Citi analyst Bin Liu wrote. The deal would cost a total of $1.7 billion ($361 million was already paid as part of a settlement in March).

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ZTE employs 70,000 workers in China and is the fourth-largest vendor of mobile phones in the U.S. After 10 years, if there are no violations, the $400 million will be returned to ZTE. After all, a Congressional report from 2012 called ZTE and Huawei threats to US national security.

It's expected that this new amendment will make its way into the National Defense Authorization Act which is also expected to make its way through Congress and finally signed into law by President Trump.

As part of the order, ZTE must identify in detail to the Commerce Department all Chinese government ownership and control of ZTE, including public and private shares.

A separate monitor was appointed to a three-year term by a US federal court in Texas last year.

Commerce Secretary Wilbur Ross said the legislation that would restore penalties on ZTE is not a certainty as the measure still needs final approval.

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.