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Export Ban Sought on Mainland Chinese Telecom Companies for Sanctions Violations

Bi-partisan legislation introduced in both the House (H.R. 602) and Senate (S. 152) on 16 January would direct the president to impose denial orders banning the export of U.S. parts and components to mainland Chinese telecommunications companies that are in violation of U.S. export control or sanctions laws. According to a press release from Sen. Tom Cotton (Republican-Arkansas), this bill includes the following provisions.

  • establishes that it is U.S. policy to enforce denial orders banning the export of U.S. parts and components to mainland Chinese telecom companies that have violated U.S. export control laws or sanctions
  • directs the president to impose the same strict penalties originally faced by ZTE on any mainland Chinese telecom firm found to be in violation
  • ensures that penalties for violations are not withdrawn until a year-long pattern of compliance and co-operation proves that policies surrounding systematic lawbreaking by mainland Chinese telecom firms have been changed
  • prohibits any executive agency official from modifying any penalty imposed on mainland Chinese telecom companies, their agents or affiliates until the president certifies that the company has not violated U.S. laws for one year and is co-operating fully with U.S. investigations
  • highlights the congressional role in overseeing executive branch export control and sanctions determinations regarding mainland Chinese telecom companies

The press release notes that this legislation follows news that the chief financial officer of Huawei was arrested on charges of violating U.S. sanctions. “Chinese telecommunications firms like Huawei represent a growing threat to American national security,” said Rep. Mike Gallagher (Republican-Wisconsin). “As state-directed enterprises, they ultimately report to the Chinese Communist Party and will be employed where and whenever possible to undermine American interests and those of our allies. This bi-partisan legislation sets a simple standard: if a Chinese telecommunications firm is found to have violated U.S. sanctions moving forward, it will be subject to the same severe punishment originally imposed on ZTE.”

In 2018 the U.S. Department of Commerce issued a seven-year ban on exports to Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE) after determining that ZTE had violated an agreement settling charges that it committed hundreds of U.S. sanctions violations involving shipments to Iran and North Korea. However, the ban was subsequently lifted after ZTE fulfilled several requirements, including paying a US$1 billion penalty, replacing its entire board of directors and senior leadership, and placing an additional US$400 million in suspended penalty money in escrow. ZTE previously paid US$892 million in penalties to the United States under a March 2017 settlement agreement.

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