25 May 2018
ZTE Requests Suspension of Export Ban as Trump Suggests Potential Reversal
Zhongxing Telecommunications Equipment Corporation has asked the U.S. Department of Commerce’s Bureau of Industry and Security to stay its order banning exports to ZTE for seven years for violating U.S. export controls. According to press reports, ZTE believes the ban could threaten its financial viability and recently provided additional information to BIS outlining its compliance efforts. Easing the ban was one of the requests mainland China reportedly made of the United States during the recent bi-lateral trade talks in Beijing.
Under the BIS order, the following are prohibited with respect to ZTE through 13 March 2025.
- exports or re-exports to or on behalf of ZTE of any item subject to the Export Administration Regulations
- any action that facilitates the acquisition or attempted acquisition by ZTE of the ownership, possession or control of any item subject to the EAR that has been or will be exported from the U.S., including financing or other support activities related to a transaction whereby ZTE acquires or attempts to acquire such ownership, possession or control
- any action to acquire from or facilitate the acquisition or attempted acquisition from ZTE any item subject to the EAR that has been exported from the United States
- obtaining from ZTE in the United States any item subject to the EAR with knowledge or reason to know that the item will be, or is intended to be, exported from the United States
- engaging in any transaction to (i) service any item subject to the EAR that has been or will be exported from the United States and that is owned, possessed or controlled by ZTE or (ii) service any item, of whatever origin, that is owned, possessed or controlled by ZTE if such service involves the use of any item subject to the EAR that has been or will be exported from the United States (servicing means installation, maintenance, repair, modification or testing)
Meanwhile, in an unusual development that has elicited bi-partisan criticism President Trump has said he is directing the Commerce Department to help ZTE “get back into business, fast.” U.S. Commerce Secretary Wilbur Ross further explained the DOC will now consider “alternative remedies to the one that we had originally put forward.” In separate tweets Trump indicated that the ban would cause the loss of “too many jobs in China” and would also negatively affect the U.S. suppliers from which ZTE purchases a “big percentage of individual parts” for its products. He also indicated that easing the ban could be used as leverage in “the larger trade deal we are negotiating with China.”
According to press reports, however, any deal could be modest in nature. The White House is said to be pursuing an agreement that would ease the ZTE ban in return for mainland China lowering import duties on U.S. farm goods that were increased in response to U.S. tariff increases on steel and aluminium. It does not appear that any of the demands on an extensive list the U.S. submitted to mainland China a few weeks ago would be resolved by this agreement. On the other hand, a Politico article noted that Treasury Secretary Steve Mnuchin, “who has become Trump’s point person in the talks, may view a cumulative number of smaller deals that accomplish some of the bigger asks the U.S. laid out … as representing systemic reform.”
Trump’s reversal on ZTE was explained as “part of a very complex relationship the U.S. has with China” by a White House spokesman but was met with opposition by members of Congress on both sides of the aisle. Rep. Adam Schiff (Democrat-California) said Trump “should care more about national security than Chinese jobs.” Senate Minority Leader Chuck Schumer (Democrat-New York) said the United States should be “taking tough action against actors like ZTE” but that “before it’s even implemented, the president backs off.” Sen. Marco Rubio (Republican-Florida) said he hoped Trump’s decision does not signal the beginning of a trend. Responding via Twitter, Trump said, “Be cool, it will all work out!”