US says ZTE can resume limited business while sanctions are debated

The Trump administration has handed ZTE another lifeline, Bloomberg reports, allowing it to resume certain business activities while US lawmakers decide how to deal with the company going forward. In April, the US Commerce Department banned ZTE from working with US companies after the company shipped US-made parts to Iran and North Korea -- in violation of US trade sanctions -- and then lied about giving the executives involved with those deals large bonuses. Though the Trump administration is looking to offer ZTE a reprieve, some members of Congress would like to see certain sanctions stay in place. And while the two sides try to work that out, ZTE will be allowed to keep providing some services.

After the seven-year ban was put into place, ZTE reportedly stopped manufacturing its products. Because most of the company's phones use US-produced Qualcomm processors, the ban put it at a production impasse and severely threatened its future. However, in June, the Commerce Department announced that the US had made a deal with ZTE, agreeing to lift the ban as long as the company paid a $1 billion penalty, installed a whole new set of directors and embedded a US-selected compliance department.

But a number of US lawmakers weren't satisfied with that arrangement and added language to the Senate's National Defense Authorization Act bill that would reinstate sanctions against ZTE. The lawmakers' concern stems from a belief that ZTE might share information with the Chinese government and poses a security risk to the US. "China is using its telecommunications companies as means to conduct espionage," Senator John Cornyn (R-TX) told the Wall Street Journal last month. We need to solve the larger puzzle of trade and national security in addition to the enforcement action for the violation of sanctions." The Senate later passed that bill, which now needs to be reconciled with the House of Representatives' version that doesn't include the ZTE provision.

The Commerce Department's Bureau of Industry and Security authorized ZTE to support networks and equipment that were under contract prior to the April 15th ban. The company may also support phones available to the public before that date as well as collect or send certain payments. The authorization also permits "the disclosure to ZTE of information regarding security vulnerabilities in items owned, possessed or controlled by ZTE when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of communications networks and equipment." These actions will be allowed from July 2nd to August 1st.