Just the Facts
Five Facts on the Chinese Tech Bans
By Emma Petasis
June 10, 2019 | Blog
With prominent Chinese firms taking the lead in the development of pivotal 5G telecommunications technology, the U.S. has recently acted to curb their ability to operate in the United States. Here are five facts on what is happening.
1. ZTE and Huawei are two prominent telecommunications manufacturers based in China.
Like Apple or Samsung, ZTE and Huawei are two prominent sellers of mobile phones. Making inexpensive Android phones, Huawei is the largest seller of mobile phones, and ZTE is the fourth largest.
2. The National Defense Authorization Act bans the use of Chinese tech.
Signed in August 2018, the National Defense Authorization Act was passed as part of providing for the common defense and focused on strategic threats posed by China and Russia. An element of the act bans any purchasing of ZTE and Huawei products by the U.S. government, after the two companies were found to be security threats.
3. ZTE and Huawei paid multiple fines to the U.S. after violating sanctions.
After violating sanctions on Iran and North Korea by shipping equipment to the countries, ZTE paid a $1.2 billion fine to the U.S. and a seven-year export ban was imposed, in which American companies will not be able to sell parts or their services to ZTE. The following month, the Trump administration lifted the ban, and imposed more fines of over $1 billion, and forced the company to replace ZTE’s executives and board of directors in order to continue doing business with the U.S. ZTE obliged and fired their top executives, but the replacements are likely to be influenced by the previous directors and shareholders.
4. The U.S. added Huawei Technologies to an “Entity List,” making it difficult for the company to work with any U.S. firm.
In May 2018 the Trump administration penalized Huawei by adding them to an “Entity List” which forces Huawei and any affiliates to obtain a U.S. government license in order to buy American technology. This makes it difficult for Huawei to do business with U.S. companies, and President Trump is using the listing as a bargaining chip in his broader trade negotiations with the Chinese government. ZTE was previously on the entity list but was removed from the list in the past year.
5. The acting director of the White House Office of Management and Budget (OMB) is seeking a delay on the most recent ban on Huawei.
Acting OMB director Russell Vought argued that stakeholders need more time to prepare for the implementation of the ban, and the ban may damage the ability of American companies to innovate and develop new technology. These companies have since applied for licenses to continue to sell to Huawei despite the ban.If this delay is approved, the ban would take effect in three years and one month.