Earlier this week, the Bureau of Industry and Security re-imposed on Chinese telecom giant ZTE a seven-year export denial order which the agency imposed and suspended on March 23. 2017. That March 2017 order noted that the suspension could be lifted and the order reimposed if various probationary conditions detailed in the order were not met.

This week’s order re-imposing the previously suspended export denial order is premised on misrepresentations made in two letters sent by ZTE to BIS. The first, sent on November 30, 2016, and before the March 23, 2017 order itself, referred to “employee disciplinary measures” that ZTE had taken or would take in the future. The second, sent on July 20, 2017, said it was sent “to confirm that the measures detailed by ZTE with respect to discipline have been implemented.” In fact, according to BIS, the promised letters of reprimand were not sent out when these letters were written and the employees at issue had received their full 2016 bonus.

Now, of course, lying to BIS is a very bad thing. But, honestly, are these two letters enough for BIS to back out of the deal and rescind the suspension of the export denial order?

In fact, if you look at how the new order justifies this action, it is clearly playing fast and loose with the facts, leaving the undeniable impression that U.S. trade policy and our broader disagreements with China had more to do with this action than these two letters. Here is the relevant language from the new order:

The Settlement Agreement and March 23, 2017 Order require that during the probationary period, ZTE is to, among other things, complete and submit six audit reports regarding ZTE’s compliance with U.S. export control laws. The Settlement Agreement and March 23, 2017 Order also include a broad cooperation provision during the period of the suspended denial order. This cooperation provision specifically requires that ZTE make truthful disclosures of any requested factual information. The Settlement Agreement and March 23, 2017 Order thus, by their terms, essentially incorporate the prohibition set forth in Section 764.2(g) of the EAR against making any false or misleading representation or statement to BIS during, inter alia, the course of an investigation or other action subject to the EAR.

Of course, the whole game is given away by the statement that certain provisions “essentially incorporate” section 764.2(g) of the EAR. “Essentially incorporates” means, of course, that the probationary conditions did not include 764.2(g) but BIS firmly wishes that they had.

The “Tenth” section of the Order clearly indicates that suspension is premised on compliance with the “probationary conditions set forth above.” So that doesn’t include the “cooperation provision” which is referenced in the above quoted language of the order and which is contained in the “Twelfth” section.  Last time I checked, “Twelfth” is below not above the “Tenth” Section. And even if you suspend the laws of geometry and physics to put it above the “Tenth” section, that provision requires ZTE “to continue to cooperate.” There’s nothing in it at all that says anything about statements made before the order was even entered such as those in the November 2016 letter.

In fact, the probationary conditions are in the “Third,” “Fourth,” and “Fifth” sections of the Order. These deal with the monitor’s reports, compliance training, maintaining a compliance program, and retention of records in a fashion accessible in the United States. You won’t find in these sections, which are the probationary conditions “above” the “Tenth” section, any requirement that ZTE send reprimand letters, dock bonuses, comply in the future with section 764.2(g) of the EAR, or have fully complied with that section in the past.

As I said, lying to federal agencies is bad. But so is not abiding by the rule of law.

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