ZTE Penalties Backed in Defense Measure Passed by U.S. House

(Bloomberg) -- The House voted to punish China’s ZTE Corp. as part of an annual defense policy bill, as Congress pressures President Donald Trump not to weaken sanctions on the telecommunications equipment maker accused of violating trade-sanction agreements and posing a threat to U.S. national security.

The defense measure passed on a 351-66 vote Thursday. It would ban government agencies from using technology made by ZTE and would prohibit the Defense Department from renewing contracts with vendors that work with the Chinese company. The measure also would bar government use of Chinese-made video surveillance equipment.

The measure also would apply to several other Chinese companies, including Hytera Communications Corp., Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co.

ZTE became a flash point in U.S.-China relations after the administration crippled the company by cutting it off from U.S. suppliers for allegedly violating terms of a 2017 settlement over Iran and North Korea sanctions violations and then lying about it. The U.S. alleges that the state-linked enterprise is abetting the transfer of U.S. technology to China’s military.

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The legislation illustrates growing congressional opposition to Trump’s reconsideration of penalties against ZTE as a favor to the country’s president, Xi Jinping, after the company estimated losses of at least $3.1 billion from a U.S. technology ban.

Trump has said he would “envision” a revised penalty for the company, including a requirement that it appoint a new board of directors and pay a “very large fine” of perhaps $1.3 billion.

On Wednesday, Secretary of State Mike Pompeo told the House Foreign Affairs Committee that the administration would devise a plan to reduce the risks to the U.S. posed by ZTE. “We’re going to get this right,” he said.

The defense policy bill passed Thursday is H.R. 5515.

A draft Senate defense bill to be released Thursday will contain language restricting Trump’s ability to lift sanctions on ZTE, according to a Senate Republican aide. The language, part of a foreign investment provision inserted into the bill, would require Trump to certify that lifting the sanctions doesn’t harm national security.

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