ZTE USA Ban and Agreement: Senators planning to dump ZTE by overturning Trump agreement
Senators planning to dump ZTE by overturning Trump agreement: Trump Administration had saved the phone manufacturer ZTE by lifting some of the sanctions on Chinese imports. ZTE was completely buried with its business destroyed due to the sanctions. As a result, it was saved after the Trump Administration decided to lift to some of those sanctions. However, now a senator group is planning to reverse the agreement.
The deal which was announced by commerce Sec Wilbur Ross required the company to pay around $ 1 billion in fine. Also, it required the company to set aside around $ 400 million in an escrow account. These were for any future violations and fines. Also, the company will have to inculcate a compliance team. The members of the compliance team will be decided by the government of United States. Within 30 days, the company will also be required to make changes to its board of directors. Similar changes will have to be done to its executive team as well.
According to Ross, the government will be able to easily embed a proper compliance department into the company. This will not be an outside committee but rather entire department within the company. The United States government in the future will have the capability to shut down the operations of the company if it commits any further violations.
On the verge of the shutdown:
The company was planning to shut down its operation after the government enforced a seven-year ban on it to buy components from many companies from the United States. Also, the US intelligence also warned that companies like ZTE world are using their devices in order to spy on the American citizens. This was being done on the behalf of the Chinese government.
Intervention by Xi Jinping:
The ban was overturned only after the Chinese premier Xi Jinping made a plea to Donald Trump. As a result of this intervention from the top, the sanctions were overturned. At the same point in time, a group of senators is trying to overturn these concessions.
Senators trying to overturn the concessions:
The senators Chris Van Hollen and Tom Cotton are trying to pass an amendment to the National defense authorization act. This will ensure that the Commerce Department will be able to penalize ZTE. It will also undermine the changes which have been made by the White House. Also, it will prevent any government departments from buying telecommunication equipment from companies like ZTE. Also, the governments in any form cannot come to the aid of these companies in the future.
If the senators are able to overturn these concessions, the company might face a ban once again. It seems like Trump is interested more in saving jobs in China rather than America. Keyword: Senators, Trump, ZTE, China
What did ZTE do to get banned in USA?
What is ZTE, and why does the US think it’s a national security threat?
The United States has struck a deal with ZTE, ending a high-stakes dispute with China.
What is ZTE, and why do American officials believe it poses a national security threat?
What is ZTE?
ZTE is a Chinese telecommunications equipment manufacturer that was founded in 1985. Among other products, it makes inexpensive Android smartphones. ZTE says it has partnerships with 150 wireless companies in more than 60 countries.
It is the fourth-largest seller of mobile phones in the United States and the second-largest seller of prepaid phones.
The company uses parts from many US companies, including chips from Qualcomm (QCOM) and glass from Corning (GLW).
Its US headquarters is in Richardson, Texas, and it has about 75,000 employees around the world.
The company is listed on both the Hong Kong and Shenzhen stock exchanges.
Why does the US government say ZTE poses a national security threat?
In March 2017, ZTE agreed to pay a record fine of $1.2 billion to the United States for violating sanctions on Iran and North Korea.
The company was accused of shipping equipment to these two countries. It had allegedly made 283 shipments to North Korea. ZTE claimed to have stopped doing business in Iran in 2012 but secretly resumed operations there the next year.
“Those who flout our economic sanctions and export control laws will not go unpunished — they will suffer the harshest of consequences,” Commerce Secretary Wilbur Ross said in a statement after the fine was announced.
After that, ZTE overhauled most of its top management. CEO Zhao Xianming, who had taken over in April 2016, said the company had introduced new compliance procedures.
“ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company,” he said at the time.
Why did the United States impose a ban on ZTE?
But ZTE didn’t punish the employees who were involved. Instead, it paid them full bonuses, the Commerce Department says.
That’s why, in April 2018, the United States imposed a seven-year export ban on the company. American companies were forbidden from selling parts or services to ZTE.
The company still relies on US tech for its products. The ban brought its factories to a standstill. And shareholders were left in limbo. ZTE’s Hong Kong-listed stock has been suspended since the ban took effect.
Why did the Trump administration offer ZTE a lifeline?
The US crackdown on ZTE came at a delicate time for economic relations between Washington and Beijing. The two sides had threatened each other with waves of new tariffs on tens of billions of dollars of exports.
The Trump administration came up with a tentative deal in May to get ZTE back into business by lifting the ban and imposing other punishments instead.
“The objective was not to put ZTE out of business,” Treasury Secretary Steven Mnuchin said. “The objective was to make sure that they abide by our sanctions programs.”
Trump also tweeted his support to find “additional remedies” to the issue.
“President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
But Trump’s lifeline was controversial. The Senate Banking Committee overwhelmingly approved an amendment that would block Trump from reducing penalties on ZTE without first providing Congress proof that the company is following American laws.
“If the president and his team won’t follow through on tough sanctions against ZTE, it’s up to Congress to ensure that happens,” Senate Minority Leader Chuck Schumer said last month. “Both parties have come together today to strongly rebuke ZTE and the administration’s soft approach.”
What’s the latest deal?
Ross announced the new deal on Thursday.
Under the deal, ZTE will pay the United States a $1 billion fine and put $400 million in an escrow account in case it violates the terms. It must change its board of directors and executive team in the next 30 days. And an American oversight team will be installed inside the company.
“This is a pretty strict settlement,” Ross told CNBC. “The strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”
“This should serve as a very good deterrent not only for them but for other potential bad actors,” he said.