Senate Votes to Block Trump's Lifeline to Chinese Telecom Giant

A signboard of ZTE in Shanghai, China, on April 21, 2018. (Imaginechina via AP Images)

WASHINGTON — A bipartisan coalition of Senate lawmakers blocked President Trump’s lifeline to a Chinese telecom giant deemed a national security risk through an amendment in the National Defense Authorization Act passed 85-10 on Monday.

The Commerce Department earlier this month announced a deal to pull ZTE out from under the weight of sanctions, after Trump in May vowed to help the telecom company, which has been the subject of equipment bans for suspected espionage as well as a violator of Iran and North Korea sanctions, get back on its feet.

Top officials from the CIA, NSA, FBI and the Defense Intelligence Agency testified at a Senate Intelligence Committee hearing in February that smartphones made by Chinese tech companies Huawei or ZTE posed a security risk. The Pentagon recently banned U.S. bases from selling Huawei and ZTE devices in retail stores, as they “may pose an unacceptable risk to the department’s personnel, information and mission.”

In April, Commerce Secretary Wilbur Ross announced that his department’s Bureau of Industry and Security imposed a denial of export privileges against ZTE. The company agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion in March 2017 after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice. This year, the Commerce Department discovered that ZTE made false statements to BIS during the settlement period and during the 2017 probationary period.

Also, in 2016, ZTE was found to have been one of the manufacturers behind carefully concealed backdoor spyware placed on more than 700 million Android phones.

On May 13, Trump tweeted, “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

Nearly two weeks ago, Ross announced in a Commerce Department statement that ZTE “agreed to severe additional penalties and compliance measures to replace the U.S. Commerce Department’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement.”

The department said that the “purpose of this settlement is to modify ZTE’s behavior while setting a new precedent for monitoring to assure compliance with U.S. law.”

Lawmakers swung into action to block the move, with Sens. Marco Rubio (R-Fla.), Tom Cotton (R-Ark.), Chris Van Hollen (D-Md.), and Chuck Schumer (D-N.Y.), along with co-sponsors Richard Blumenthal (D-Conn.), Susan Collins (R-Maine), and Bill Nelson (D-Fla.), introducing an amendment to the NDAA that would restore penalties on ZTE for violating export controls.

“We’re heartened that both parties made it clear that protecting American jobs and national security must come first when making deals with countries like China, which has a history of having little regard for either,” Rubio, Cotton, Van Hollen and Schumer said in a joint statement after the defense bill’s passage. “It is vital that our colleagues in the House keep this bipartisan provision in the bill as it heads towards a conference.”

ZTE shares dropped 25 percent today following the vote.

Schumer said on the Senate floor today that “Americans of all stripes should be cheering this news.”

“Allowing the sale of ZTE technology in the United States could allow China to spy on every American’s private information, on American businesses, and even on our military. It’s a security risk. And why is President Trump, in a simple call with President Xi, just letting it continue? Fines don’t matter at all to this giant company. They will still pose the same security risk before and after they pay a fine,” he added, calling on the House to keep the provision in the defense bill and “not let the pressure of President Trump who simply doesn’t know how to negotiate – President Xi flatters him and he gives in on something vital to national security.”