U.S. May Seek to Install Compliance Staff at ZTE, Says Ross

(Bloomberg) -- The U.S. may seek to install its own compliance personnel at ZTE Corp. operations, according to Commerce Secretary Wilbur Ross, adding the Trump administration has made no final decision over changing its penalties on the Chinese telecommunications company.

“If we do decide to go forward with an alternative, what it literally would involve would be implanting people of our choosing into the company to constitute a compliance unit,” Ross said in an interview on CNBC on Thursday. “That unit would report back to the department of Commerce and would report back to the board there after we’ve made the change.”

President Donald Trump earlier this month ordered the Commerce department to review a seven-year ban preventing U.S. suppliers from selling key components to ZTE because the company violated sanctions law. Trump said on Tuesday the U.S. may instead require that ZTE appoint a new board of directors and pay a “very large fine” of perhaps $1.3 billion.

Lawmakers from both Trump’s Republican party and Democrats have rejected any easing of the ZTE sanctions, saying the move would pose a national security threat. The administration has said the ZTE situation will be decoupled from securing a wider trade deal with China.

Ross said the U.S. has the upper hand in dealing with ZTE, which is estimating losses of at least $3 billion a day from the U.S. technology-sales ban. The Shenzhen, China-based company depends on U.S. components, such as chips from Qualcomm Inc., to build its smartphones and networking gear.

“Right now the sanctions that we put in are in effect, so they don’t exactly have a very strong negotiating position because this is a very painful thing for them,” said Ross. “They’re not getting the Qualcomm material they need, they’re not the other material that’s very highly technical and without which they cannot operate a large part of their business. So they’re not exactly in a strong negotiating position.”

©2018 Bloomberg L.P.