U.S. Lawmakers Seek to Restore ZTE Penalties in Defense Bill

(Bloomberg) -- The U.S. Senate advanced legislation to restore penalties on ZTE Corp., after President Donald Trump drew sharp criticism for easing restrictions to get the Chinese company back in business.

The Senate voted 91-4 late Monday to begin debate on the National Defense Authorization Act (NDAA), including a ZTE amendment that will keep restrictions on the Chinese telecom company despite a reprieve last week from the U.S. Commerce Dept. The provision was included on a list of amendments that is backed by both Republicans and Democrats.

“Great news! Our bipartisan amendment restoring penalties on #ZTE is included in the #NDAA bill the Senate will be advancing to later this evening,” Senator Marco Rubio said in a Twitter post before the vote.

Rubio, a Republican from Florida, is co-sponsor of the amendment, with Senators Chris Van Hollen, a Democrat from Maryland, and Tom Cotton, a Republican from Arkansas.

Commerce Secretary Wilbur Ross last week announced the U.S. reached a deal with ZTE that included a record fine, changes to the company’s board and management and U.S. compliance officers. He cautioned at the time that the U.S. still retains “the power to shut them down again.”

ZTE shares have been halted from trading as the company is caught up in the trade dispute between the world’s two biggest economies. Other companies’ fortunes are also being buffeted by the back-and-forth in the ZTE case. NXP Semiconductors NV slipped 2.5 percent in early trading Tuesday in New York on news of the restored penalties for ZTE. The move is an indication that the Dutch semiconductor maker won’t be approved by Chinese regulators to be bought by Qualcomm Inc. Approval of the $43 billion acquisition is seen as a quid-pro-quo for ZTE’s ability to do business in the U.S., where it depends on being able to buy chips and other components to make its networking gear and smartphones.

The U.S. blocked ZTE’s access to U.S. suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. The telecommunications company announced it was shutting down just weeks after the ban was announced.

Broad Deal

Trump has said he reviewed the penalties as a personal favor to Chinese President Xi Jinping. Lifting the sales ban on ZTE was a key demand China made in the broader trade talks with the U.S. to avert a trade war.

The deal has sparked bipartisan pushback, with many lawmakers citing national security as their main concern.

White House trade adviser Peter Navarro on Sunday likened the deal to “three strikes you’re out,” referring to two prior violations ZTE committed under the sanctions agreement with the U.S.

Ross briefed senators on the ZTE deal Monday, Senate Majority Whip John Cornyn said. Cornyn said after the briefing that it’s clear Ross was only dealing with one piece of ZTE problems, namely the company’s violations of sanctions related to North Korea and Iran.

The ZTE provision included in the defense bill would amount to a “death penalty,” for the company, said Cotton, who’s one of authors of the legislation.

Van Hollen said the move is a very good sign for stopping the ZTE deal. “What you are seeing is a bipartisan reaction against letting ZTE off the hook,” he said.

The quick action to stop Trump from rolling back the ZTE penalties shows the seriousness of the issue, Senate Minority Leader Chuck Schumer said in a statement.

“The fact that a bipartisan group of senators came together this quickly is a testament to how bad the Trump administration’s ZTE deal is and how we will not shy away from holding the president’s feet to the fire when it comes to keeping his promise to be tough on China,” Schumer said.

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