U.S. Department of Commerce Announces Selection of ZTE Special Compliance Coordinator

August 24, Secretary of Commerce Wilbur L. Ross, Jr. announced the selection of Roscoe C. Howard, Jr. to be the Special Compliance Coordinator (SCC) for Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (collectively, ZTE). The Special Compliance Coordinator was selected after a rigorous search by the Bureau of Industry and Security (BIS). This appointment is the result of the historic settlement between the Department of Commerce and ZTE that includes a $1.761 billion fine, a ten-year probationary period, and the installation of the coordinator to conduct regular and comprehensive compliance supervision by a team answerable to BIS.

“Today’s appointment is the continuation of the unprecedented measures imposed on ZTE by the Department of Commerce,” said Secretary Ross. “Mr. Howard is exceptionally well-versed in corporate compliance, having tried more than 100 cases as a federal prosecutor, as well as helping those in the private sector on compliance and ethics issues.”

“I am honored to be selected for this critical role,” said Mr. Howard. “My team and I will be vigilant in efforts to ensure that ZTE complies with all U.S. export control laws and regulations.”

Mr. Howard is a Partner in Barnes & Thornburg’s Litigation Department in Washington, D.C. He is a graduate of Brown University and earned his J.D. from the University of Virginia School of Law. He previously served as the U.S. Attorney for the District of Columbia from 2001-2004. Prior to his appointment, Mr. Howard was a tenured, full professor at the University of Kansas School of Law. He has twice served as an Associate Independent Counsel under both Republican and Democrat Presidents and was an Assistant U.S. Attorney in the District of Columbia and in the Eastern District of Virginia. Howard has served as an Associate Independent Counsel on two occasions. During his first occasion serving as an Associate Independent Counsel, Howard served as a lead prosecutor for the Office of Independent Counsel (OIC) investigating questionable programs, officials and activities at the U.S. Department of Housing and Urban Development under former Secretary Samuel R. Pierce, Jr. During his second occasion serving as an Associate Independent Counsel, Howard was lead trial counsel in the fraud, false statements and gratuities investigation and trial of former Secretary of Agriculture A. Michael Espy.

The Special Compliance Coordinator’s function will be to coordinate, monitor, assess, and report on compliance with U.S. export control laws by ZTE, its subsidiaries, and affiliates worldwide. As stated in the Superseding Agreement and Order, the coordinator will operate with unprecedented access across the company.

In addition to the requirement to retain the coordinator, the Superseding Agreement and Order imposed a $1.761 billion monetary penalty, a ten-year conditionally-suspended denial order, which BIS can activate in the event of additional violations during the ten-year probationary period, and a requirement that ZTE replace the entire board of directors and the senior leadership of the company.

BACKGROUND:

On April 15, 2018, BIS activated the seven-year conditionally-suspended denial order against ZTE in response to ZTE’s admission that it made false statements to the U.S. Government during the probationary period when the company falsely stated that it would or had disciplined numerous employees responsible for the violations that led to the March 2017 settlement agreement. ZTE instead rewarded that illegal activity with bonuses. This action followed the March 2017 settlement agreement, in which ZTE agreed to a then record-high BIS civil penalty of $661 million, after engaging in a multi-year conspiracy to supply, build, and operate telecommunications networks in Iran using U.S.-origin equipment in violation of the U.S. trade embargo, and committing hundreds of U.S. sanctions violations involving the shipment of telecommunications equipment to North Korea. Moreover, ZTE also made false statements and obstructed justice by creating an elaborate scheme to prevent disclosures to and mislead the U.S. Government. In addition to monetary penalties, ZTE had agreed to a seven-year suspended denial of export privileges.

The Department of Commerce’s Bureau of Industry and Security is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items. The BIS Office of Export Enforcement detects, prevents, investigates, and assists in the sanctioning of illegal exports of such items.

Secretary Ross Announces $1.4 Billion ZTE Settlement; ZTE Board, Management Changes and Strictest BIS Compliance Requirements Ever

Washington – Secretary of Commerce Wilbur Ross today announced that Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”) has agreed to severe additional penalties and compliance measures to replace the U.S. Commerce Department’s Bureau of Industry and Security (BIS) denial order imposed as a result of ZTE’s violations of its March 2017 settlement agreement.  Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List. These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement.

ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws. This is the first time BIS has achieved such stringent compliance measures in any case.  ZTE is also required under the new agreement to replace the entire board of directors and senior leadership for both entities.  Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period. These collectively are the most severe penalty BIS has ever imposed on a company.

“Today, BIS is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Secretary Ross. “We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. technology as well as collect the additional $400 million in escrow. The first settlement with ZTE set a record for civil and criminal penalties in an export control case.  This new settlement agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.”

The purpose of this settlement is to modify ZTE’s behavior while setting a new precedent for monitoring to assure compliance with U.S. law. Embedding compliance officers into the company vastly improves the speed with which the Department of Commerce can detect and deal with any violations.

BACKGROUND:

On April 15, 2018, BIS activated the suspended denial order against ZTE in response to ZTE falsely informing the U.S. Government that it would or had disciplined numerous employees responsible for the violations that led to the March 2017 settlement agreement.  ZTE instead rewarded that illegal activity with bonuses.  This action followed the March 2017 settlement agreement, in which ZTE agreed to a then record-high BIS civil penalty of $661 million, after engaging in a multi-year conspiracy to supply, build, and operate telecommunications networks in Iran using U.S.-origin equipment in violation of the U.S. trade embargo, and committing hundreds of U.S. sanctions violations involving the shipment of telecommunications equipment to North Korea.  They also made false statements and obstructed justice by creating an elaborate scheme to prevent disclosures to and affirmatively mislead the U.S. Government.  In addition to monetary penalties, ZTE had agreed to a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations.

The Commerce Department’s BIS is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items. The BIS Office of Export Enforcement detects, prevents, investigates and assists in the sanctioning of illegal exports of such items. For more information, please visit us at www.bis.doc.gov

Joint Statement of the United States and China Regarding Trade Consultations

At the direction of President Donald J. Trump and President Xi Jinping, on May 17 and 18, 2018, the United States and China engaged in constructive consultations regarding trade in Washington, D.C. The United States delegation included Secretary of the Treasury Steven T. Mnuchin, Secretary of Commerce Wilbur L. Ross, and United States Trade Representative Robert E. Lighthizer. The Chinese delegation was led by State Council Vice Premier Liu He, Special Envoy of President Xi.

There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details.

The delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.

Both sides attach paramount importance to intellectual property protections, and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area, including the Patent Law.

Both sides agreed to encourage two-way investment and to strive to create a fair, level playing field for competition.

Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner.

Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements

April 16th, Secretary of Commerce Wilbur L. Ross, Jr. announced that the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”).

In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. Government.  In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).

The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken.  ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation.” said Secretary of Commerce Ross.

These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.

“ZTE misled the Department of Commerce.  Instead of reprimanding ZTE staff and senior management, ZTE rewarded them.  This egregious behavior cannot be ignored,” Secretary Ross said.

BACKGROUND:

Denial Orders are issued by the Assistant Secretary for Export Enforcement of the Bureau of Industry and Security, denying the export privileges of a company or individual. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.

This is a regulatory action and is unrelated to any ongoing trade-related actions.

BIS is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items. The BIS Office of Export Enforcement detects, prevents, investigates and assists in the sanctioning of illegal exports of such items.

For more information, please visit us at www.bis.doc.gov.

U.S. Department of Commerce Issues Affirmative Preliminary Antidumping Duty Determinations on Stainless Steel Flanges from China and India

Today, the U.S. Department of Commerce announced the affirmative preliminary determinations in the antidumping duty (AD) investigations of imports of stainless steel flanges from China and India.

“The United States will not sit back and watch as our domestic businesses are destroyed by unfair foreign government subsidies and dumping,” said Secretary Ross. “This Administration is taking fair and transparent action on behalf of American industry to defend businesses and workers while we continue reviewing the facts related to this decision.”

The Commerce Department preliminarily determined that exporters from China and India have sold stainless steel flanges in the United States at 257.11 percent, and 18.10 to 145.25 percent less than fair value, respectively.

As a result of today’s decision, Commerce will instruct U.S. Customs and Border Protection (CBP) to collect cash deposits from importers of imports of stainless steel flanges from China and India based on these preliminary rates.

In 2016, imports of stainless steel flanges from China and India were valued at an estimated $16.3 million and $32.1 million, respectively.

The petitioners are the Coalition of American Flange Producers and its individual members: Core Pipe Products, Inc. (Carol Stream, IL) and Maass Flange Corporation (Houston, TX).

Enforcement of U.S. trade law is a prime focus of the Trump administration. From January 20, 2017, through March 20, 2018, the Commerce Department has initiated 102 antidumping and countervailing duty investigations – a 96 percent increase from January 20, 2016, through March 20, 2017.

The AD law provides U.S. businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of unfair pricing of imports into the United States. Commerce currently maintains 428 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.

Commerce is scheduled to announce the final determinations in these investigations on or about June 5, 2018.

If Commerce makes affirmative final determinations of dumping and the U.S. International Trade Commission (ITC) makes affirmative final injury determinations, Commerce will issue AD orders. If Commerce makes negative final determinations of dumping or the ITC makes negative final determinations of injury, the investigations will be terminated and no orders will be issued.

The U.S. Department of Commerce’s Enforcement and Compliance unit within the International Trade Administration is responsible for vigorously enforcing U.S. trade laws and does so through an impartial, transparent process that abides by international rules and is based solely on factual evidence.

Foreign companies that price their products in the U.S. market below the cost of production or below prices in their home markets are subject to antidumping duties.

U.S. Department of Commerce Issues Affirmative Preliminary Determination on Forged Steel Fittings from China

March 8th, U.S. Secretary of Commerce Wilbur Ross announced the affirmative preliminary determination in the countervailing duty (CVD) investigation of imports of forged steel fittings from China, finding that exporters in China received countervailable subsidies equal to 13.79 percent.

The Commerce Department will instruct U.S. Customs and Border Protection to collect cash deposits from importers of forged steel fittings from China based on these preliminary rates.

“This announcement is separate from today’s the steel and aluminum tariff’s announced by President Trump as a result of the Department’s 232 investigations,” said Secretary Ross. “We will continue to review all information related to this preliminary determination while standing up for American workers and companies.”

In 2016, imports of forged steel fittings from China were valued at an estimated $78.4 million.

The petitioners are Bonney Forge Corporation (Mount Union, PA), and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (Pittsburgh, PA).

Enforcement of U.S. trade law is a prime focus of the Trump administration.  From January 20, 2017, through March 8, 2018, the Commerce Department has initiated 102 antidumping and countervailing duty investigations – a 96 percent increase from the same period in 2016- 2017.

CVD law provides U.S. businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of unfair subsidization of imports into the United States.  Commerce currently maintains 418 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.

Commerce is currently scheduled to announce its final CVD determination on July 24, 2018.

If the Commerce Department makes an affirmative final determination in this investigation and the U.S. International Trade Commission (ITC) makes an affirmative final injury determination, Commerce will issue a CVD order.  If the Commerce Department makes a negative final determination or the ITC makes a negative final determination of injury, the investigation will be terminated and no order will be issued.

The U.S. Department of Commerce’s Enforcement and Compliance unit within the International Trade Administration is responsible for vigorously enforcing U.S. trade laws and does so through an impartial, transparent process that abides by international rules and is based solely on factual evidence.

Imports from companies that receive unfair subsidies from their governments in the form of grants, loans, equity infusions, tax breaks and production inputs are subject to “countervailing duties” aimed at directly countering those subsidies.

Section 232 investigations help to determine the effects of imports on America’s national security and give the President the ability to address any threats to national security by restricting imports through tariffs.

Section 232 of the Trade Expansion Act of 1962, as amended, gives the executive branch the ability to conduct investigations to “determine the effects on the national security of imports.” Within 270 days of initiating any investigation, the Commerce Department issues a report to the President with the investigation’s findings, including whether certain imports threaten to impair America’s national security. The President has 90 days to determine whether he concurs with the findings and, if so, to use his statutory authority under Section 232 “to adjust the imports” as necessary, including through tariffs or quotas.

President Donald J. Trump has accepted the Commerce Department’s recent conclusion that imported steel and aluminum “threaten to impair the national security,” and is taking action to protect America.

In January 2018, the Department of Commerce delivered the Section 232 reports on steel and aluminum to the President. In February 2018, the Commerce Department publicly released Section 232 reports on imported steel and aluminum. The reports concluded that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security,” as defined by Section 232. The reports found that United States steel imports were nearly four times our exports, and that aluminum imports had risen to 90% of total demand for primary aluminum. The Commerce Department recommended that President Trump take action to protect the long-term viability of our nation’s steel and aluminum industries.

Following President Trump’s signing of a Presidential Proclamation imposing tariffs on steel and aluminum products from certain countries, U.S. Secretary of Commerce Wilbur Ross released the following statement:

“President Trump is taking action today to protect both our national security and industries critical to our economy. The President’s decision regarding the steel and aluminum Section 232 reports are the result of a long and well-thought-out process led by the Commerce Department. Once again, President Trump is keeping his promises and standing up for American families, American businesses, and American workers.”

Department of Commerce Issues Affirmative Preliminary Antidumping Duty Determinations on Fine Denier Polyester Staple Fiber

December 19, U.S. Secretary of Commerce Wilbur Ross announced the affirmative preliminary determinations in the antidumping duty (AD) investigations of imports of fine denier polyester staple fiber, finding that exporters from China, India, Korea, and Taiwan have sold this merchandise at less than fair value.

“The U.S. values its relationships with these nations, but all of our trading partners must play by the rules,” said Secretary Ross. “We will continue to review all information related to this preliminary determination while standing up for American businesses and workers.”

As a result of decision, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of fine denier polyester staple fiber from China (52.66 percent to 170.92 percent), India (0.66 percent to 15.66 percent), Korea (0.00 percent to 45.23 percent), and Taiwan (0.00 percent to 48.86 percent) based on these preliminary rates.

In 2016, U.S. imports of fine denier polyester staple fiber from China, India, Korea, and Taiwan were valued at an estimated $79.4 million, $14.7 million, $10.6 million, and $9.6 million, respectively.

The petitioners are DAK Americas LLC (NC), Nan Ya Plastics Corporation, America (SC), and Auriga Polymers Inc. (NC).

Click HERE for a fact sheet on decisions.

Enforcement of U.S. trade law is a prime focus of the Trump administration. From January 20, 2017, through December 18, 2017, Commerce initiated 79

antidumping and countervailing duty investigations – a 52 percent increase from 52 initiations in the previous year.

The AD law provides U.S. businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of unfair pricing of imports into the United States. Commerce currently maintains 412 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.

Unless the final determinations are postponed, Commerce is currently scheduled to announce its final AD determinations on March 5, 2018.

If Commerce makes affirmative final determinations of dumping and the U.S. International Trade Commission (ITC) makes affirmative final injury determinations, Commerce will issue AD orders.  If Commerce makes negative final determinations of dumping or the ITC makes negative final determinations of injury, the investigations will be terminated and no orders will be issued.

Commerce’s Enforcement and Compliance unit within the International Trade Administration is responsible for vigorously enforcing U.S. trade laws and does so through an impartial, transparent process that abides by international law and is based solely on factual evidence.

Foreign companies that price their products in the U.S. market below the cost of production or below prices in their home markets are subject to antidumping duties.