ZTE stock falls after US penalties over Iran, North Korea

Frederick Owens
June 14, 2018

The White House will aim to block legislative language before Congress that would block a Trump administration agreement allowing China's No. 2 telecommunications equipment maker, ZTE Corp., to resume business with United States suppliers, the Wall Street Journal reported Wednesday.

In a statement to reporters, amendment co-sponsor Sen. Tom Cotton, R-Ark., Chris Van Hollen, D-Md., and Chuck Schumer, D-N.Y., added language to the National Defense Authorization Act to reinstate a ban on ZTE buying USA components.

ZTE had admitted to violating sanctions on Iran and North Korea.

ZTE employs 70,000 workers in China and is the fourth-largest vendor of mobile phones in the U.S.

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 Senate amendment passed despite late Monday-night lobbying from Commerce Secretary Wilbur Ross, according to The Wall Street Journal.

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"The fact that a bipartisan group of senators came together this quickly is a testament to how bad the Trump administration's ZTE deal is and how we will not shy away from holding the president's feet to the fire when it comes to keeping his promise to be tough on China", Schumer said.

However, in May the president tweeted that he was working with China to keep ZTE running and hoped a deal would prevent "too many jobs in China" from being lost.

As part of the US order, the Commerce Department also will select a monitor, known as a special compliance co-ordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years.

Sen. Cotton explained on Twitter that ZTE has extensive ties with the Chinese Communist Party and a record of doing business with North Korean and Iran.

Lawmakers said on June 11 that the U.S. Senate will vote as soon as this week on bipartisan legislation to block the deal, which would allow the company to start buying equipment from U.S. suppliers again once its pays the fine and changes its management.

Visitors pass in front of the Chinese telecom giant ZTE booth February 26 at the Mobile World Congress in Barcelona. They added a provision keeping the Commerce Department penalties in place to a substitute amendment that is expected be tacked on to the defense bill before it passes the chamber.

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