The White House will seek to block the congressional passage of a provision included in the Senate version of annual defense authorization legislation that would prevent the Trump administration from lifting an export denial order against Chinese telecom company ZTE, according to a White House spokesperson.
Commerce Secretary Wilbur Ross announced last week that the United States and China agreed on a settlement to lift an order imposed in April banning U.S. entities from exporting to ZTE in exchange for ZTE paying a $1.4 billion penalty as well as installing a new board of directors and a team of coordinators handpicked by the Bureau of Industry and Security (BIS) to monitor ZTE’s compliance with U.S. export control laws.
“The massive penalties imposed on ZTE are part of an historic enforcement action taken by the Department of Commerce,” White House Deputy Press Secretary Hogan Gidley said in a statement Wednesday. “This will ensure ZTE pays for its violations and gives our government complete oversight of their future activity without undue harm to American suppliers and their workers. The administration will work with Congress to ensure the final NDAA conference report respects the separation of powers.”
The United States has not officially lifted the export ban yet.
The language included in the 2018 National Defense Authorization Act (NDAA) would generally prohibit, for a period of one year, federal officials from modifying penalties, including those imposed pursuant to denial orders, with respect to Chinese telecommunications companies determined to have violated an export control or sanctions law of the United States.
To modify any such penalty, the president would have to certify to appropriate congressional committees that the company hasn’t violated U.S. laws for one year and that the company is fully cooperating with U.S. government investigations, if any.
Drafted by Sens. Tom Cotton, R-Ark., and Chris Van Hollen, D-Md., the language also specifically states that any official reduction, elimination or suspension of BIS’ continuing export denial order against ZTE before the date of the NDAA’s enactment would be canceled upon the date of enactment.
Further, the language would ban heads of executive agencies from entering into, extending or renewing contracts with entities that use any equipment, system or service that uses covered telecommunications equipment or services as “a substantial or essential component of any system or as critical technology as part of any system.”
However, the language also states that nothing in that provision shall be construed to prohibit the head of an executive agency from procuring with an entity to provide a service that connects to third-party facilities, “such as backhaul, roaming or interconnection arrangements.”
“Covered telecommunications equipment or services” refer to telecom equipment produced by ZTE or Huawei Technologies Company, including subsidiaries and affiliates, telecommunications services provided by such entities or using such equipment and/or telecommunications equipment or services produced or provided by an entity that the Defense Department “reasonably believes” to be an entity associated with the government of China.
The already passed House version of the NDAA does not include the ZTE language of the Senate bill.
If and when the Senate passes its legislation, both houses of Congress will hash out differences between their respective bills and develop one conference version of the NDAA to be subject to a vote in both chambers.
The Commerce Department on April 16 announced the lifting of a suspension of an export denial order regarding ZTE after U.S. officials found that company employees made false statements to BIS in 2016 and 2017.
ZTE in March 2017 agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements and obstructing justice, Commerce said in an April 16 press release.