Manufacture This

The blog of the Alliance for American Manufacturing

Looks like ZTE is back in business.

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It's been a few weeks since we last checked in with the shady Chinese telecommunications firm. You know, the one that broke U.S. sanctions with North Korea and Iran — and is considered a major cyber threat to national security.

And there's a big update: The Commerce Department on Friday afternoon lifted its ban on U.S. companies selling goods to ZTE after the company deposited $400 million in a U.S. bank escrow; ZTE had previously paid the U.S. Treasury $1 billion as part of a deal to resume its U.S. operations. The company's stock is now surging!

Republican Sen. Marco Rubio (Fla.) was among bipartisan Members of Congress criticizing the decision, noting that there "is no 'deal' with a state-directed company that the Chinese government and Communist Party uses to spy and steal from us where Americans come out winning."

This whole saga started back in April, when the Commerce Department quite rightly barred ZTE from importing any American components from seven years, as it had discovered ZTE had failed to discipline employees who had previously violated U.S. sanctions. On top of that, the Defense Department also banned the sale of all ZTE devices on military bases, fearing Chinese espionage, and consumers were encouraged to avoid purchasing ZTE products.

There was widespread, bipartisan agreement at the time that this was the right move. But then for some reason President Trump stepped in, tweeting that he and Chinese President Xi Jinping were "working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost."

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That was our reaction, too.

But since the president had given the order, the Commerce Department went about striking a deal with ZTE, which included the $1 billion ban and $400 million in additional penalities. In addition, a U.S.-selected team will be embedded in the company for 10 years to monitor activities and report back to U.S. officials.

Although the ZTE ban has been lifted, the story might not be over. When the Senate passed its annual defense policy bill, it included an amendment that would reverse the settlement and ban ZTE from conducting business in the United States.

However, the Senate's version of the bill still must be reconciled with the one passed by the House of Representatives, which did not include the amendment. It remains uncertain whether it will ultimately be included in the final measure that makes it to the president's desk for his signature.