ZTE faces strong headwinds from the U.S. Senate

The headwinds stem from the outcome of an investigation which concluded that ZTE and Huawei Technologies are Chinese telecommunications firms that are linked to the Chinese Communist Party’s intelligence apparatus.

According to U.S. lawmakers, legislation has already been prepared to block the Trump administration’s agreement with China which allows ZTE Corp to resume business ties with its American suppliers.

The issue is going to be taken up by the U.S. Senate, in the coming days, as part of the National Defense Authorization Act, (NDAA), a defense policy that the U.S. Congress passes every year.

The White House strongly opposes the ZTE measure.

If the NDAA passes, the House of Representatives and Senate will then negotiate a final version of it. The ZTE provision, which is not included in the House version of the defense bill, could be stripped out during those negotiations.

According to Mac Thornberry, the Republican chairman of the House Armed Services Committee, he would oppose anything in the NDAA which is not germane to the Defense Department if it threatened to delay swift passage of the $716 billion bill, which governs everything from military pay raises to aircraft and ship purchases, military aid and other national security policies.

Thornberry expects the process to be completed by the end of July.

Further, the House version of the NDAA includes a separate provision which bars U.S. government agencies from using “risky” technology from either ZTE or Huawei Technologies and describes both Chinese telecommunications firms as “linked to the Chinese Communist Party’s intelligence apparatus.”

If this becomes law, ZTE would once again face export control norms and be barred from having commercial relations, which includes purchases, leasing of equipment as well as services, with U.S. companies.

It is to be seen how ZTE’s readiness to pay a fine of $1 billion, overhauling its top management and putting $400 million in a U.S.-approved escrow account in a bank, will play out in the near future.

The ZTE measure’s main sponsors, Republican Senator Tom Cotton and Democratic Senator Chris Van Hollen have both said they believe they have the numbers from both, Republicans and Democrats, to pass the bill through the Senate despite White House’s opposition.

“These companies have proven themselves to be untrustworthy, and at this point I think the only fitting punishment would be to give them the death penalty – that is, to put them out of business in the United States,” said Cotton in a Senate speech, referring to both ZTE and Huawei.

Both, Cotton and Van Hollen said, they would keep working in the coming months, to ensure that the ZTE measure stays in the defense bill.

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