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White House Seeks to Block Senate Bid to Kill ZTE Deal

13 June 2018

The Senate's move comes less than a week after the administration struck an agreement with ZTE that would have kept the telecom company engaged in the US market.

The move enraged Republicans and Democrats who said ZTE not only worked with Iran and North Korea in violation of USA sanctions, but is a threat to national security, offering Chinese intelligence operatives a way to spy on the US through ZTE products.

The bipartisan amendment would reimpose penalties on ZTE for violating USA sanctions against exporting to Iran and North Korea that the Trump administration sought to lift in exchange for the company paying a $1 billion fine and funding an in-house compliance team of US officials.

All members of ZTE's leadership at or above the senior vice president level also must be terminated, along with any executive or officer tied to the wrongdoing.

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The ZTE issue encompasses U.S. Cotton said the president won't veto the bill "because the bill pertains many other critical priorities".

Under the settlement, ZTE will pay a total civil penalty of $1.7 billion, including $361 million already paid as part of a March 2017 agreement, the $1 billion fine and the $400 million that will go into escrow. The coordinator will have a staff of at least six employees funded by ZTE. "The new governance structure will pose challenges for the company's management in the future", Zhongtai Securities said in a note.

In Shenzhen, the firm's shares were down 10% in early trade, which is the maximum allowed on the mainland.

Hong Kong's benchmark Hang Seng index was down 0.6 per cent by the midday break.

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The ban forced ZTE to suspend major operations, and trading in its shares in were halted on 17 April. Senators on both sides of the aisle criticized Trump for calling on the Commerce Department to reverse its position, with many saying ZTE poses a risk to United States national security.

ZTE said Tuesday it will resume operating activities affected by the ban "as soon as practicable".

On Tuesday, senators on both sides of the aisle spoke out against Trump's deal, which is believed to have been made to soften a potential trade war in China, following the announcement of steel and aluminium tariffs on the country's exports. He stressed that lawmakers must "remain clear-eyed and unified on the threat China poses to USA interests and national security", even if the president wasn't.

However, this year the Commerce Department reimposed the sanctions when it emerged that the telecoms company - China's second-largest - had not, in fact, disciplined the management.

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White House Seeks to Block Senate Bid to Kill ZTE Deal