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American ShipperShippingTrade and Compliance

Senate panel aims to block easing of ZTE sanctions

The move comes amid reports that President Donald Trump has offered to lift restrictions on the Chinese telecom giant in exchange for trade concessions from Beijing.

   The Senate Banking Committee Tuesday overwhelmingly approved an amendment to the Foreign Investment Risk Review Modernization Act of 2017 that would effectively block President Donald Trump from easing sanctions against Chinese telecommunications giant ZTE Corp.
   Introduced by Sen. Chris Van Hollen, D-Md., and passed by a 23-2 vote, the amendment expressly prohibits the president from altering enforcement penalties on Chinese telecom firms without first showing Congress that the company has complied with U.S. law for a minimum of one year and is fully cooperating with investigators.
   In addition, the amendment includes language stipulating that penalties for violations of U.S. sanction or export control laws may not be modified for reasons unrelated to national security.
   The U.S. Department of Commerce in April lifted the suspension of a denial of export privileges of U.S. firms to ZTE after U.S. officials found company employees made false statements to the Bureau of Industry and Security (BIS) in 2016 and 2017. The reinstatement of the seven-year export ban came after ZTE agreed in March 2017 to a combined civil and criminal penalty and forfeiture of $1.19 billion for illegally shipping telecommunications equipment to Iran and North Korea, making false statements and obstructing justice through preventing disclosure to and affirmatively misleading the U.S. government.
    But just last week, the Trump administration appeared to be reconsidering those penalties in the context of ongoing bilateral trade negotiations between the United States and China.
   On Sunday, May 13, a day before the start of BIS’ Annual Conference on Export Controls and Policy in Washington, Trump tweeted that he and Chinese President Xi Jinping were “working together” to give “massive” ZTE “a way to get back into business, fast,” adding that “too many” jobs at the company had been lost already and that Commerce “has been instructed to get it done!”
   The House Appropriations Committee pushed back later in the week, passing an amendment to the 2019 Commerce, Justice, Science (CJS) Appropriations bill that similarly prevents Commerce from renegotiating sanctions on ZTE.
   Then this past weekend, Treasury Secretary Steven Mnuchin said that following two days of meetings between trade officials from the United States and China in Washington, D.C., both sides had agreed to put planned tariffs “on hold” while they negotiate an agreement that would put a heavy emphasis on reducing the bilateral trade deficit and protecting intellectual property.
   This reignited concerns among Congress and the trade enforcement community that Trump essentially was using an enforcement case as a bargaining chip in ongoing trade talks, offering to ease sanctions in exchange for concessions from Beijing.
   “We know ZTE is a repeated and flagrant violator of U.S. laws — there’s absolutely no question of their culpability,” Van Hollen said in a statement following the passage of the FIRRMA amendment. “Yet the president of the United States is fighting to protect jobs in China at a company that may be spying on Americans and has been sanctioned by our government.
   “This is deeply troubling, regardless of your political party. … We must continue to work to stop the president from absolving ZTE of its many transgressions in the interest of Chinese jobs.”
   Rep. C.A. Dutch Ruppersberger, D-Md., who co-sponsored the House amendment, said in a statement Monday that renegotiating the ZTE sanctions “sends a dangerous message that we are weak and yielding under the right circumstances.”
   “When the United States enacts sanctions, we should stand behind them,” he said. “We are a nation of laws. The rules of the game are simple: Conduct your business pursuant to the law.
   “The whole point of sanctions is to hit countries and companies who break the law where they hurt — their wallets. Money talks.”
   Both Van Hollen and Ruppersberger noted their amendments passed with broad bipartisan support, signaling that Congress is united on this particular issue.
   “The good news is that both Republicans and Democrats seem to agree,” said Ruppersberger. “I encourage my colleagues on both sides of the aisle to continue pursuing efforts to maintain strict sanctions against ZTE using all legislative vehicles at our disposal. Nobody should get a free pass, least of all a foreign company that ignores embargoes and could be used to infiltrate the devices and networks that are indispensable to American life.”

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