WASHINGTON — The Commerce Department has told Chinese phone maker ZTE it can resume business in a limited manner, despite the fact that Congress continues to strongly oppose any efforts to help the company considered a national security risk and sanctions buster.
Congress left town on Friday for a recess and on Monday the Commerce Department said ZTE can go forward with transactions tied to network maintenance on contracts it signed on or before April 15. That April date is when the federal government barred U.S. firms from selling parts and services to ZTE as punishment for its failure to pay a fine for sanctions-busting to North Korea and Iran.
However, the Trump administration declared in June that ZTE could resume purchasing U.S. parts if the company paid a $1.4 billion fine, shifted its management board and officers, and brought in a U.S-selected team of monitors.
As of late June, ZTE had paid $1 billion of the fine, with the remaining $400 million promised to an escrow account. Some management changes were announced last week.
Both the House and Senate have passed defense bills that include language in various degrees blocking ZTE from doing business with U.S. firms. The two chambers are selecting conference committee members to resolve differences in the defense bills, including the ZTE language, when Congress returns from its current recess.
The bill passed both chambers easily and with wide margins, enough votes to override a presidential veto.
“Broad majorities of Democrats and Republicans in Congress know that China has led a dedicated and long-term campaign to steal American secrets, techniques, and know-how,” Rep. Ruben Gallego (D-Ariz.), who wrote the House amendment about ZTE, said in a statement after the vote. He said the House opposition to ZTE is “a small step in a larger fight to build a comprehensive strategy to defeat and deter Chinese attacks on our national and economic security.”
House and Senate members have also included another Chinese telecommunications company, Huawei, in the bans. U.S. security officials have warned Huawei could pose a security risk by using its technology to spy on behalf of the Chinese government, a charge Huawei has consistently denied.
The Commerce Department reprieve lasts until August 1, when the Trump administration believes ZTE will meet all the requirements of the June deal the White House offered. It does not take into account Congressional action on the defense bills that could completely ban ZTE operations in the U.S.
Congress and the Pentagon have been resolute in their objections to ZTE, both on security grounds as well as the company’s thumbing its nose at U.S. sanctions and a 2017 agreement it pledged to honor. The company is considered a national security threat over the possibility its technology could be used for cyber attacks or spying on behalf of the Chinese government.
The Senate amendment to the fiscal 2019 National Defense Authorization Act reinstates the ban on ZTE that a deal cut by the Commerce Department in June.