ZTE said to ap­peal US ex­port ban af­ter lobby ef­forts fail

The Pak Banker - - COMPANIES/BOSS -

China's ZTE Corp will ap­peal tough U.S. ex­port re­stric­tions im­posed last week, ac­cord­ing to a per­son fa­mil­iar with the mat­ter, af­ter the tele­com equip­ment maker's costly lob­by­ing ef­fort failed to al­lay con­cerns about its busi­ness. The U.S. Com­merce Depart­ment im­posed re­stric­tions on U.S. sup­pli­ers pro­vid­ing cru­cial com­po­nents to ZTE for al­leged Iran sanc­tions vi­o­la­tions, a move likely to dis­rupt its global sup­ply chain.

"The U.S. Depart­ment of Com­merce and ZTE Corp are in on­go­ing dis­cus­sions," a se­nior Com­merce Depart­ment of­fi­cial told Reuters. "Th­ese dis­cus­sions have been con­struc­tive, and we will con­tinue to seek a res­o­lu­tion."

How long the ap­peals process might take re­mains un­clear. It usu­ally takes a year or more for ex­port curbs to be re­moved for a com­pany, but Wash­ing­ton can act more quickly.

ZTE, also a top smart­phone maker, de­clined to com­ment on its ap­peal plans or about its lob­by­ing ef­forts. In state­ments fol­low­ing the im­po­si­tion of the re­stric­tions, ZTE said it was "ac­tively fa­cil­i­tat­ing com­mu­ni­ca­tions with the U.S. gov­ern­men­tal depart­ment to search for a so­lu­tion."

Since com­ing un­der fire in 2012 for al­leged deals with sanc­tions-hit Iran and pos­si­ble links to the Chi­nese govern­ment and mil­i­tary, ZTE has ramped up its spend­ing on Wash­ing­ton lob­by­ists.

It spent $5.1 mil­lion in the last four years, up from $212,000 in 2011, as it sought to as­suage na­tional se­cu­rity con­cerns, ac­cord­ing to pub­licly avail­able lob­by­ing records main­tained by Congress.

That was around $1 mil­lion more than what Huawei Tech­nolo­gies [HWT.UL], a larger Chi­nese tele­com equip­ment com­pany also un­der scru­tiny in Wash­ing­ton over na­tional se­cu­rity is­sues, spent over the same pe­riod.

ZTE lob­by­ists con­tacted law­mak­ers in both houses of Congress, the Depart­ment of Home­land Se­cu­rity, the Depart­ment of Com­merce, the State Depart­ment and the Na­tional Se­cu­rity Agency to dis­cuss mat­ters such as cy­ber se­cu­rity, sup­ply chains and trade re­la­tions, ac­cord­ing to the lobby doc­u­ments. ZTE used at least five lob­by­ing firms, and for­mer U.S. of­fi­cials such as ex-Ne­braska con­gress­man Jon Lynn Chris­tensen. Act­ing for ZTE, Chris­tensen met with U.S. Depart­ment of Trea­sury, Depart­ment of Com­merce and law­mak­ers to pro­vide "education re­gard­ing sup­ply-chain se­cu­rity" and "cy­ber se­cu­rity is­sues," the lobby dis­clo­sure doc­u­ments show. When con­tacted by Reuters, Chris­tensen said the lob­by­ing was not di­rectly re­lated to the in­ves­ti­ga­tions. "My work was ed­u­cat­ing mem­bers of congress on a smart­phone man­u­fac­turer and the op­por­tu­ni­ties (ZTE) pro­vided for a very af­ford­able phone," Chris­tensen said.

In 2013, the tele­coms gear maker hired lob­by­ists from the Podesta Group to en­cour­age the Depart­ment of De­fense and the State Depart­ment to main­tain "open and trans­par­ent mar­kets in U.S.-China trade re­la­tions," the doc­u­ments show. ZTE spent $1.44 mil­lion with Podesta, an in­flu­en­tial firm in Wash­ing­ton that also helps Chi­nese and other for­eign com­pa­nies nav­i­gate merg­ers with chal­leng­ing na­tional se­cu­rity im­pli­ca­tions.

Tony Podesta, the firm's chair­man, told Reuters his work for ZTE was not di­rectly re­lated to the in­ves­ti­ga­tions.

"I ba­si­cally said 'you are a Com­mu­nist Chi­nese com­pany, the way I see it if your govern­ment tells you you have to do some­thing - you have to do it,'" Rup­pers­berger told Reuters, re­fer­ring to his con­cern that the com­pany could as­sist China's govern­ment to hack into Amer­i­can net­works.

"Now they have trade vi­o­la­tions with Iran," he said. "There's an ex­am­ple of why I don't want to do busi­ness with China when it in­volves na­tional se­cu­rity."

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