Small-Business Allies Warn House Committee on ZTE Risks; Trump Backs CFIUS Update Bill

Small-business community representatives warned the House Small Business Committee Wednesday about what they feel is the threat Chinese telecom equipment manufacturer ZTE poses. President Donald Trump said he will support passage of the Foreign Investment Risk Review Modernization Act (HR-4311/S-2098) to curb foreign companies' ability to violate U.S. companies' IP rights, instead of invoking the International Emergency Economic Powers Act. The additional ZTE criticism follows more than a month of congressional debate about the Trump-led push to lift a Department of Commerce-imposed ban on U.S. companies selling telecom software and equipment to ZTE (see 1806260031). The Senate voted 85-10 to pass a version of the FY 2019 National Defense Authorization Act (HR-5515) that would reinstate the ZTE ban (see 1806190051). “Small businesses have become top targets for nefarious state-backed actors because they tend to be the softest targets,” said House Small Business Chairman Steve Chabot, R-Ohio. “They have fewer resources to manage their IT systems and respond to cybersecurity incidents, and they often lack the technical knowledge needed to assess the ever-evolving threats.” The Chinese company is “seeking to disrupt manufacturing not only through the espionage” of IP “but also the destruction of the U.S. supply chain by crippling them both financially and through attacks,” said TechSolve CEO David Linger. “For those of us that work with small manufacturers who have teetered on the brink of closing their doors due to cyber-attacks, their cyber-crimes are personal, real, and distressing.” ZTE “has proven to be a particularly bad actor, flouting U.S. export control laws and deceiving regulators,” said IronNet Cybersecurity President Matthew Olsen. Small businesses can't effectively “compete against nation-state attacks, aggressive, unrelenting international espionage, and theft of trade secrets,” said George Mason University Law School National Security Institute Visiting Fellow Andy Keiser. “Those are exactly the challenges presented by ZTE and Huawei.” HR-4311/S-2098 “will enhance our ability to protect the United States from new and evolving threats posed by foreign investment while also sustaining the strong, open investment environment to which our country is committed and which benefits our economy and our people,” Trump said. It would expand the Committee on Foreign Investment in the United States' scope to probe more investments, including in "critical" technology or infrastructure companies (see 1804260029).