Trump administration plans to revive ZTE

WASHINGTON — The Trump administration told lawmakers it had reached a deal that would keep Chinese telecom firm ZTE alive, a person familiar with the matter said, a move that could clear the way for further trade talks with China but at the risk of provoking a backlash in Congress.

Under the agreement brokered by the Commerce Department, ZTE would pay a substantial fine, hire American compliance officers to be placed at the firm and make changes to its current management team.

In return, the Commerce Department would lift a so-called denial order preventing the company from buying U.S. products, the person said. The Commerce Department did not respond to requests for comment.

The move would allow ZTE to once again begin doing business with U.S. companies, including Qualcomm, the chipmaker based in San Diego that is a primary ZTE supplier. The Chinese company recently was banned from buying American technology components for seven years as punishment for violating U.S. sanctions against Iran and North Korea, a penalty that industry analysts say threatened to put the company out of business within weeks.

The collapse of ZTE would be an embarrassing outcome for China, and the company’s fate has become a hurdle in trade negotiations between the

the two countries. President Donald Trump directed the Commerce Department to re-examine ZTE’s penalty based on a personal request from President Xi Jinping of China, setting off a fierce pushback from some of Trump’s national security advisers, as well as lawmakers from both parties.

Trump, however, has appeared unmoved by those concerns and has been pushing to reach some type of trade resolution with China, which has so far proved elusive. The administration wants to cut a deal on ZTE in exchange for trade concessions from China, including purchases of American agriculture and energy products, people familiar with the discussions said. Wilbur Ross, the commerce secretary, is scheduled to travel to China on June 2 to begin another round of the talks with top Chinese officials.

Such an agreement is likely to face fierce resistance on Capitol Hill. Top lawmakers — including Sen. Chuck Schumer, D-N.Y., and Sen. Marco Rubio, R-Fla. — have urged the administration not to bend on ZTE, which they consider a law enforcement and national security issue.

“ZTE presents a national security threat to the United States — and nothing in this reported deal addresses that fundamental fact,” Sen. Chris Van Hollen, D-Md., said in a statement. “If President Trump won’t put our security before Chinese jobs, Congress will act on a bipartisan basis to stop him.”

Lawmakers, including Van Hollen, have rolled out a variety of measures aimed at clipping the administration’s authority to ease penalties on ZTE and have publicly criticized the administration’s consideration of a deal.

On Thursday, the House passed a bill that would prevent the administration from easing restrictions on ZTE and on Tuesday, the Senate Banking Committee approved a similar amendment that would prevent the president from modifying penalties on Chinese telecom companies that had violated U.S. law in the past year. A group of 27 bipartisan senators also sent administration officials a letter last week warning them not to “compromise lawful U.S. enforcement actions against serial and premeditated violators of U.S. law, such as ZTE.”

“Yes they have a deal in mind,” Rubio said in a tweet on Friday. “It is a great deal… for #ZTE & China.”

“Now congress will need to act,” he added.

The Chinese telecommunications firm has been on the brink of shutting down, following penalties imposed by the Commerce Department in April that severed important links in its supply chain.

ZTE agreed to a $1.19 billion fine and other penalties in March 2017, after it was found to have violated U.S. sanctions by selling products with American-made parts to Iran and North Korea. In April, the Commerce Department said it had found that ZTE had also made false statements relating to disciplining senior officials, and announced a seven-year ban on the company’s purchases of U.S. products.

That ban has crippled the Chinese firm and threatened to put tens of thousands of Chinese employees of the company out of work. The Chinese government had made clear that lifting ZTE’s penalty would be a condition for continuing with trade talks, and that if the penalty was not lifted, U.S. companies operating in China might face further retaliation, people briefed on the discussions said.