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Congress Moves to Retain Export Ban on Chinese Company

Friday, June 15, 2018
Sandler, Travis & Rosenberg Trade Report

An effort to limit the president’s ability to lift a ban on exports to a major Chinese telecommunications company is advancing in the Senate despite the White House’s objections.

In April the Department of Commerce imposed a seven-year ban on exports to Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE) for violating a March 2017 agreement resolving charges that ZTE had committed numerous violations of U.S. export rules. However, apparently at the request of Chinese officials, President Trump directed the DOC to lift the ban. The DOC announced June 7 that it would do so once ZTE pays $1.4 billion in penalties and that the company will also be required to accept DOC-approved compliance monitors and dismiss its entire board of directors and senior leadership.

However, the Senate has added to an annual defense authorization bill a provision that would prevent the president from lifting the export ban or other penalties until he shows that ZTE has not committed any export violations for at least a full year. This provision would also nullify any action by the president to lift the ban before the bill is enacted.

(In the House, Reps. Ted Deutch, D-Fla, and Ileana Ros-Lehtinen, R-Fla., have introduced a stand-alone bill (H.R. 6053) to prevent the president from modifying the ZTE export ban.)

Senators on both sides of the aisle are supporting the provision as a way to bolster U.S. national security, citing ZTE’s history of violations as well as suspicions about the role it and other Chinese telecom companies might be playing in Beijing’s cyber-espionage efforts. However, White House Deputy Press Secretary Hogan Gidley argued that these concerns would be adequately addressed by the penalties announced June 7, which “will ensure ZTE pays for its violations and [give] our government complete oversight of their future activity without undue harm to American suppliers and their workers.” Administration officials say they will work to have the provision removed when the defense bill goes to a House-Senate conference.

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