Published: Wed, June 13, 2018
Global | By Marsha Munoz

The Senate wrecked Trump’s deal to save ZTE

The Senate wrecked Trump’s deal to save ZTE

It would also ban USA government agencies from purchasing any devices or services from ZTE or Huawei, another major Chinese telecom firm, or using government loans to subsidize any subsidiaries or affiliates of the two companies.

According to the agreement, ZTE will pay the US$400-million in escrow into a USA bank account for 10 years and hire an independent special compliance co-ordinator to monitor the company's activities during that period on behalf of the USA government.

The White House didn't immediately respond to a request for comment. For days, senators have scrambled to block the deal, all as the Trump administration has scrambled to undercut those efforts.

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The Senate's moves represent a sweeping rebuke of President Donald Trump's push to negotiate a settlement with ZTE, which went against the Commerce Department's initial ban. All members of ZTE's leadership at or above the senior vice president level also must be terminated, along with any executive or officer tied to the wrongdoing.

On June 1, Reuters exclusively reported on the monetary penalty and other terms demanded to reverse the ban. Among other things, it would restore penalties on ZTE for violating USA export controls and bar US government agencies from purchasing or leasing equipment or services from the Chinese company.

The Hong Kong-listed shares of ZTE slid as much as 41 percent to HK$14.98, their lowest in a year, following a two-month trading suspension, while its Shenzhen shares fell by their 10 percent limit after it confirmed details of the agreement publicized by the US government on Monday. ZTE then ceased major operations.

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Under orders from Mr. Trump, the Commerce Department last week weakened penalties on ZTE, reducing a near-death sentence to a $1 billion fine and continued oversight.

ZTE employs 70,000 workers in China and is the fourth-largest vendor of mobile phones in the U.S. Senators on both sides of the aisle criticized Trump for calling on the Commerce Department to reverse its position, with many saying ZTE poses a risk to USA national security.

The Senate added the block to the National Defense Authorization Act, a must-pass piece of legislation. The department also will select a monitor, known as a special compliance coordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years. The amendment also bans USA government agencies from buying or leasing equipment from ZTE and its Chinese rival, Huawei, and bars US loans to the companies. It depends on US-made components for the production of handsets.

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

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