US lawmakers reach deal to pull back from ZTE ban in victory for Donald Trump

US lawmakers have reached a deal to not reinstate a ban on ZTE that crippled the Chinese telecommunications company for violating US business laws, in a victory for US President Donald Trump's administration.

Some Senate lawmakers have backed down from their attempt to reimpose the ban placed by the Commerce Department in April that prevented ZTE from buying any American components, effectively shuttering it, according to the conference report released on Tuesday.

The compromised version of the amendment, which is part of the must-pass Defence Appropriation Bill, adopted the softer language by the House of Representatives, which merely stops the Pentagon from buying ZTE products, on national security grounds.

The agreed-upon amendment stresses the importance of replacing ZTE's eqipment and services contracts with "rural communications service providers, anchor institutions, and public safety organizations as soon as practicable", but it no longer seeks to reimpose penalties on the company.

The agreement marks the end of contentious efforts by some lawmakers to reimpose penalties that would destroy ZTE. Trump had ordered the lifting of the ban in what he said was part of his trade war negotiations with China.

The company, which is the second largest telecoms equipment maker in China, was originally sanctioned for repeatedly violating US trade laws by selling products to US-sanctioned North Korea and Iran.

Penalties against ZTE were first imposed by the US in early 2017, but a settlement kept the ban from going into effect after ZTE agreed to punish those responsible for covering up its sales to Iran and pay a penalty of more than US$1 billion.

In April this year, the Department of Commerce re-activated sanctions against ZTE, contending that the company had lied when it said it had taken measures against the employees who ran the Iran unit.

The move to ban ZTE from buying American electronics parts, most notably from chipmaker Qualcomm, for seven years led the company to close the majority of its operations in May.

Democratic Senator Mark Warner (left) and Republican Senator Marco Rubio (right), both members of the Senate Intelligence Committee and opposed to lifting the ZTE ban, are pictured on July 16. Photo: Getty Images via AFP

Trump, in what he called a favour to Chinese President Xi Jinping, directed the Commerce Department get ZTE back to business. In return, ZTE agreed to penalities including US$1.4 billion in fines and an escrowed account, a new board of managers, and a compliance office overseen by US-approved staff. Earlier this month, ZTE resumed business.

The backpedalling had met with resistance from some in Congress, who argued that the payments did not address security concerns about the Chinese telecoms equipment maker.

The Senate had passed a bipartisan amendment in June to undo Trump's settlement. It also would have banned the US businesses and the government from using the products and services from ZTE and Huawei Technologies or any entity controlled by China.

Last Friday, in a slew of tweets and statements, legislators expressed anger over the softening on ZTE, saying some lawmakers have capitulated.

Senate Minority Leader Chuck Schumer said in a statement that Trump has "once again made President Xi and the Chinese Government the big winners and the American worker and our national security the big losers".

And Republican Senator Marco Rubio tweeted: "This is how #China influences our government policies. They spent a small fortune lobbying congress to drop restrictions on #ZTE & it worked. Long term China is a bigger threat to America's security than Russia, when are we going to take it seriously?"

The bill will be voted by the House later this week, followed by a vote by the Senate, before being sent to the President to sign off.

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