May 2, 2018 / 5:14 PM / 22 days ago

U.S. considering restrictions on China's telecoms companies - sources

WASHINGTON (Reuters) - The Trump administration is considering issuing an executive order that would restrict some Chinese companies’ ability to sell telecommunications equipment in the United States, two industry officials said, an action likely aimed at Huawei Technologies Co Ltd [HWT.UL] and ZTE Corp.

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman

President Donald Trump’s administration has already targeted Huawei and ZTE, two of the world’s major telecommunications equipment manufacturers, with a number of recent actions to restrict their businesses in the United States based on national security concerns.

The news, reported earlier by the Wall Street Journal, came as Washington despatched a team to Beijing headed by Treasury Secretary Steve Mnuchin to hold talks over an ever-worsening economic relationship with China. The relationship has seen Trump threaten to impose tariffs on up to $150 billion (£110 billion) of Chinese imports, a move that could trigger a trade war between the world’s two largest economies.

U.S. lawmakers and the Trump administration have pressured U.S. companies to not sell Huawei or ZTE products, saying they potentially could be used to spy on Americans. Earlier this year they pushed AT&T to drop a deal with Huawei to sell its smartphones in the United States.

A White House National Security Council spokesman said “While we have no comment on individual actions, protecting critical infrastructure, including the supply chains associated with such infrastructure, is a critical part of protecting America’s national security and public safety.”

Representatives of Huawei and ZTE could not be reached immediately for comment on the possible executive action, though both have denied allegations their products are used to spy.

A U.S. official familiar with ongoing administration talks about Huawei and ZTE said: “These two companies in particular are of concern because of the kind of equipment they produce and their overall market penetration.”

In April, Assistant Secretary for International Markets and Investment Heath Tarbert said the United States is considering ways to restrict sensitive Chinese investments in the United States by invoking an emergency powers law and bringing forward some security review reforms for corporate acquisitions.

Any executive action would come on the heels of a series of U.S. moves aimed at stopping or reducing access by Huawei and ZTE to the U.S. economy, including recent restrictions on U.S. suppliers of ZTE set by the Commerce Department, amid allegations the companies could be using their technology to spy on Americans.

The Federal Communications Commission in April proposed barring the use of funds from a government programme to purchase equipment or services from companies that pose a security threat to U.S. communications networks.

FCC Chairman Ajit Pai told Congress in March he shared the concerns of U.S. lawmakers about espionage threats from Huawei.

“Hidden ‘back doors’ to our networks in routers, switches — and virtually any other type of telecommunications equipment - can provide an avenue for hostile governments to inject viruses, launch denial-of-service attacks, steal data, and more,” Pai said at the time.

The U.S. Department of Defense has already stopped selling mobile phones and modems made by Huawei and ZTE in stores on its military bases, citing potential security risks.

As of April 25, the Pentagon ordered that these and related products be removed from its stores worldwide, according to Pentagon spokesman Major Dave Eastburn.

“These devices may pose an unacceptable risk to the department’s personnel, and mission,” Eastburn said.

A Huawei spokesman said the company’s products “meet the highest standards of security, privacy and engineering in every country we operate globally including the U.S.,” and added “that no government has ever asked us to compromise the security or integrity of any of our networks or devices.”

The Army and Air Force have more than 3,100 stores around the world, and also sell goods online to military personnel. The Navy Exchange has more than 300 stores worldwide, as well as stores aboard more than 100 ships.

Reporting by Tim Ahmann, Dustin Volz and David Shepardson; Writing by Chris Sanders and Mohammad Zargham; editing by David Alexander, Susan Thomas and James Dalgleish

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