U.S. Lawmakers call for China Telecoms Denial Order

Lawmakers on Capitol Hill have introduced a bill which, if passed, can impose denial orders that ban the export of U.S. components to telecoms companies based in China, including their subsidiaries or affiliates, when in violation of U.S. sanctions or export controls.

The proposed legislation follows the discovery of violations of United States sanctions by telecom giant ZTE. Huawei Technologies has also been a target of recent allegations.

During 2018, ZTE paid penalty payments totalling $1.4 billion to the U.S. government. The company was also forced to make changes to its corporate management before the export ban was finally lifted in August.

Republican Senator, Mike Gallagher, R-Wis., said in a statement:

“Chinese telecommunications firms like Huawei represent a growing threat to American national security. 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,”

Sen. Gallagher added:

“Under the legislation, he said, “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.”

Further punitive measures also required ZTE to form team of compliance coordinators, selected by and answerable to the U.S. Commerce Department’s Bureau of Industry and Security (BIS) for a period of 10 years.

Not only was the export ban a heavy blow to ZTE, but it also hit U.S. semiconductor firms.
At the time of the violations it is estimated that ZTE sourced approximately 60% of the required components for its smartphones from American suppliers.

The Telecommunications Denial Order Enforcement Act (Act) (H.R. 7255) would require:

  • establishing that it is U.S. policy to enforce denial orders banning the export of U.S. parts and components to Chinese telecoms that have violated U.S. export control laws or sanctions;

  • directing the president to impose the same strict penalties originally faced by ZTE on any Chinese telecoms found to be in violation of U.S. export control laws or sanctions;

  • maintaining penalties for U.S. export control law or sanction violations for a year “until a pattern of compliance and cooperation,” proving the Chinese telecom has changed its lawbreaking policies; and,

  • prohibiting federal agency officials from modifying penalties imposed on Chinese telecommunications companies, their agents, or affiliates until the president certifies that the company has not violated U.S. laws for one year and is cooperating fully with U.S. investigations.

The Act, which has been referred to the House Committee on Foreign Affairs, prohibits any telecom company domiciled in the People’s Republic of China, from directly or indirectly participating in any transaction involving any commodity, software or technology exported from the U.S.

Furthermore, no person may directly or indirectly engage in any transaction to service any item owned, possessed or controlled by a denied person or entity.

Reportedly, the lawmakers said their proposed legislation “would ensure Congress has oversight of the White House when it comes to export control and sanctions determinations related to Chinese telecoms.”

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