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[House Report 115-714]
[From the U.S. Government Publishing Office]

115th Congress   }                                      {      Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                      {     115-714

======================================================================

 
  RESOLUTION DIRECTING THE SECRETARY OF HOMELAND SECURITY TO TRANSMIT 
     CERTAIN DOCUMENTS TO THE HOUSE OF REPRESENTATIVES RELATING TO 
  DEPARTMENT OF HOMELAND SECURITY POLICIES AND ACTIVITIES RELATING TO 
   HOMELAND SECURITY INFORMATION PRODUCED AND DISSEMINATED REGARDING 
 CYBERSECURITY THREATS POSED BY THE ZTE CORPORATION, HEADQUARTERED IN 
                            SHENZHEN, CHINA

                                _______
                                

June 8, 2018.--Referred to the House Calendar and ordered to be printed

                                _______
                                

  Mr. McCaul, from the Committee on Homeland Security, submitted the 
                               following

                             ADVERSE REPORT

                             together with

                            DISSENTING VIEWS

                       [To accompany H. Res. 898]

    The Committee on Homeland Security, to whom was referred 
the resolution (H. Res. 898) directing the Secretary of 
Homeland Security to transmit certain documents to the House of 
Representatives relating to Department of Homeland Security 
policies and activities relating to homeland security 
information produced and disseminated regarding cybersecurity 
threats posed by the ZTE Corporation, headquartered in 
Shenzhen, China, having considered the same, report unfavorably 
thereon without amendment and recommend that the resolution not 
be agreed to.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     3
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Congressional Budget Office Estimate.............................     4
Statement of General Performance Goals and Objectives............     4
Duplicative Federal Programs.....................................     4
Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
  Benefits.......................................................     4
Federal Mandates Statement.......................................     4
Preemption Clarification.........................................     4
Disclosure of Directed Rule Makings..............................     5
Advisory Committee Statement.....................................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill, as Reported............     5
Dissenting Views.................................................     6

                          PURPOSE AND SUMMARY

    On May 16, 2018, Representative Bennie G. Thompson of 
Mississippi introduced H. Res. 898, a non-binding resolution of 
inquiry requesting the Secretary of Homeland Security transmit 
to the House of Representatives, homeland security information 
in the possession of the Secretary that refers or relates to 
the following:
    1.  Any documentation related to the use of any ZTE 
Corporation's products by the Department of Homeland Security.
    2.  Any documentation related to cybersecurity threats or 
vulnerabilities resulting from the use of ZTE Corporation's 
products by the Department of Homeland Security or the 
Department's contractors.
    3.  Any documentation related to the cybersecurity threats 
or vulnerabilities resulting from the use of ZTE Corporation's 
products by State and local governments and first responders.
    4.  Any documentation related to any alerts or warnings 
issued by the Department of Homeland Security related to the 
use of ZTE Corporation's cybersecurity products.
    5.  Any documentation related to cybersecurity threats or 
vulnerabilities posed by the use of ZTE Corporation products by 
the Federal Government.
    6.  Any documentation related to cybersecurity threats or 
vulnerabilities from state actors, including Iran, or terrorist 
organizations resulting from ZTE Corporation's activities.

                  BACKGROUND AND NEED FOR LEGISLATION

    A resolution of inquiry is a House resolution directing the 
President or the head of an executive department to provide to 
the House specific information in the possession of the 
Administration.
    Clause 7 of House Rule XIII provides that, if properly 
drafted, a resolution of inquiry is provided special 
parliamentary status allowing the Committee to which the 
measure was referred to be discharged if the Committee has not 
reported the measure back to the House within 14 legislative 
days after is introduction.
    The Committee notes that the consideration of this 
resolution of inquiry is to have the Committee comply with Rule 
XIII, it does not affect the Committee's obligation or 
commitment to investigate and require documentation from the 
Administration on issues within the Committee's jurisdictional 
authorities.
    This Committee has several ongoing, bipartisan oversight 
projects related to Department of Homeland Security supply 
chain risk management, threats posed by Chinese 
telecommunications, and other related counterintelligence 
threats.

                                HEARINGS

    No hearings were held on H. Res. 898 in the 115th Congress.

                        COMMITTEE CONSIDERATION

    The Committee met on June 6, 2018, to consider H. Res. 898, 
and ordered the measure to be reported to the House with an 
unfavorable recommendation, without amendment, by a recorded 
vote of 16 yeas and 11 nays (Roll Call Vote No. 37).

                            COMMITTEE VOTES

    Clause 3(b) of Rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report legislation and amendments 
thereto.
    The Committee on Homeland Security considered H. Res. 898 
on June 6, 2018, and took the following vote:

On ordering the resolution to be reported to the House of Representatives with an unfavorable recommendation.
Not Agreed to: 16 yeas and 11 nays.
 

----------------------------------------------------------------------------------------------------------------
                Representative                  Yea    Nay               Representative              Yea    Nay
----------------------------------------------------------------------------------------------------------------
Mr. McCaul,                         Chair....     X          Mr. Thompson of Mississippi, Ranking             X
                                                              Member.
Mr. Smith of Texas...........................                Ms. Jackson Lee......................
Mr. King of New York.........................     X          Mr. Langevin.........................            X
Mr. Rogers of Alabama........................     X          Mr. Richmond.........................            X
Mr. Barletta.................................     X          Mr. Keating..........................            X
Mr. Perry....................................     X          Mr. Payne............................            X
Mr. Katko....................................     X          Mr. Vela.............................            X
Mr. Hurd.....................................     X          Mrs. Watson Coleman..................            X
Ms. McSally..................................     X          Miss Rice of New York................            X
Mr. Ratcliffe................................                Mr. Correa...........................            X
Mr. Donovan..................................     X          Mrs. Demings.........................            X
Mr. Gallagher................................     X          Ms. Barragan.........................            X
Mr. Higgins of Louisiana.....................     X
Mr. Garrett..................................     X
Mr. Fitzpatrick..............................     X
Mr. Estes....................................     X
Mr. Bacon....................................     X
Mrs. Lesko...................................     X
                                                                                                   -------------
                                                             Vote Total:                              16     11
----------------------------------------------------------------------------------------------------------------

                      COMMITTEE OVERSIGHT FINDINGS

    Pursuant to clause 3(c)(1) of Rule XIII of the Rules of the 
House of Representatives, the Committee has held oversight 
hearings and made findings that are reflected in this report.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of Rule XIII of the Rules 
of the House of Representatives, the Committee finds that H. 
Res. 898, would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of Rule XIII of the Rules of the 
House of Representatives, a cost estimate provided by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 was not made available to the 
Committee in time for the filing of this report. The Committee 
estimates that this non-binding resolution would not result in 
any significant costs.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    Pursuant to clause 3(c)(4) of Rule XIII of the Rules of the 
House of Representatives, H. Res. 898 requests that Secretary 
of the Department of Homeland Security transmit documents 
related to the use of any ZTE Corporation's products by the 
Department of Homeland Security; cybersecurity threats or 
vulnerabilities resulting from the use of ZTE Corporation's 
products by the Department of Homeland Security or the 
Department's contractors; cybersecurity threats or 
vulnerabilities resulting from the use of ZTE Corporation's 
products by State and local governments and first responders; 
any alerts or warnings issued by the Department of Homeland 
Security related to the use of ZTE Corporation's cybersecurity 
products; cybersecurity threats or vulnerabilities posed by the 
use of ZTE Corporation products by the Federal Government; and 
cybersecurity threats or vulnerabilities from state actors, 
including Iran, or terrorist organizations resulting from ZTE 
Corporation's activities. And to provide these documents to the 
U.S. House of Representatives.

                      DUPLICATIVE FEDERAL PROGRAMS

    Pursuant to clause 3(c) of Rule XIII, the Committee finds 
that H. Res. 898 does not contain any provision that 
establishes or reauthorizes a program known to be duplicative 
of another Federal program.

   CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF 
                                BENEFITS

    In compliance with Rule XXI of the Rules of the House of 
Representatives, this resolution, as reported, contains no 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of the Rule 
XXI.

                       FEDERAL MANDATES STATEMENT

    An estimate of Federal mandates prepared by the Director of 
the Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act was not made available to the 
Committee in time for the filing of this report. The Committee 
believes that no Federal mandates are included in this 
resolution.

                        PREEMPTION CLARIFICATION

    In compliance with section 423 of the Congressional Budget 
Act of 1974, requiring the report of any Committee on a bill or 
joint resolution to include a statement on the extent to which 
the bill or joint resolution is intended to preempt State, 
local, or Tribal law, the Committee finds that H. Res. 898 does 
not preempt any State, local, or Tribal law.

                  DISCLOSURE OF DIRECTED RULE MAKINGS

    The Committee estimates that H. Res. 898 would require no 
directed rule makings.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

    H.Res. 898, if passed, would require the Secretary of 
Homeland Security to provide documents to the House of 
Representatives within 14 days of passage.
    The documents requested relate to the ZTE Corporation and 
its relationship to the Department of Homeland Security 
including: the use of any ZTE Corporation's products by the 
Department of Homeland Security; cybersecurity threats or 
vulnerabilities resulting from the use of ZTE Corporation's 
products by the Department of Homeland Security or the 
Department's contractors; cybersecurity threats or 
vulnerabilities resulting from the use of ZTE Corporation's 
products by State and local governments and first responders; 
any alerts or warnings issued by the Department of Homeland 
Security related to the use of ZTE Corporation's cybersecurity 
products; cybersecurity threats or vulnerabilities posed by the 
use of ZTE Corporation products by the Federal Government; and 
cybersecurity threats or vulnerabilities from state actors, 
including Iran, or terrorist organizations resulting from ZTE 
Corporation's activities. And to provide these documents to the 
U.S. House of Representatives.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    H. Res. 898 makes no changes to existing law.

                            DISSENTING VIEWS

    On Wednesday, June 6, 2018, the Committee on Homeland 
Security rejected H. Res. 898, a Resolution of Inquiry 
directing the Secretary of Homeland Security to transmit 
certain documents to the House of Representatives regarding 
Department of Homeland Security (DHS) policies and activities 
relating to homeland security information produced and 
disseminated regarding cybersecurity threats posed by the ZTE 
Corporation, a telecommunications company headquartered in 
Shenzhen, China.
    ZTE has a long track record of rejecting international 
business norms, operating in secrecy, and doing the bidding of 
the Chinese government. In 2012, ZTE and another Chinese 
telecommunications equipment manufacturer, Huawei, were the 
subject of a high-profile investigation by the House Permanent 
Select Committee on Intelligence, which ultimately concluded 
that ``the risks associated with Huawei's and ZTE's provision 
of equipment to U.S. critical infrastructure could undermine 
core U.S. national-security interests.''\1\ The report included 
sweeping recommendations for the U.S. Intelligence Community 
(IC) to ``remain vigilant and focused on this threat . . . 
[and] actively seek to keep cleared private sector actors as 
informed of the threat as possible.''\2\ It also directed the 
Committee on Foreign Investment in the United States to block 
acquisitions involving ZTE, and urged private entities to 
``consider the long-security risks'' of doing business with 
ZTE.\3\
---------------------------------------------------------------------------
    \1\U.S. House of Representatives Permanent Select Committee on 
Intelligence, Investigative Report on the U.S. National Security Issues 
Posed by Chinese Telecommunications Companies Huawei and ZTE, 112th 
Con. (Oct. 8, 2012), available at https://intelligence.house.gov/sites/
intelligence.house.gov/files/dicynets/huawei-
zte%20investigative%20report%20(final).pdf.
    \2\Id.
    \3\Id.
---------------------------------------------------------------------------
    In 2016, the Commerce Department imposed stiff penalties on 
ZTE for violating U.S. sanctions by making hundreds of 
shipments of microprocessors, routers, servers and other 
telecommunications equipment that was made with U.S. parts to 
Iran, Sudan, North Korea, Syria, and Cuba. In 2017, the 
Commerce Department entered into a settlement with ZTE where 
the company agreed to pay fines and punish employees involved 
in breaching U.S. sanctions or have its export privileges 
denied for seven years. In April, when the Commerce Department 
learned that the settlement had been breached, it was forced to 
bar U.S. companies from exporting to Chinese telecom equipment 
maker ZTE for seven years. In May, the Department of Defense 
(DOD) announced that it was banning U.S. military bases from 
selling Huawei and ZTE phones on the grounds that the devices 
``may pose an unacceptable risk'' of spying on soldiers or 
revealing troop whereabouts,\4\ and the Federal Communications 
Commission proposed rules barring small, rural carriers from 
buying Chinese-made telecommunications equipment.\5\
---------------------------------------------------------------------------
    \4\``Pentagon Orders Stores on Military Bases to Remove Huawei, ZTE 
Phone,'' The Wall Street Journal (May 2, 2018), available at https://
www.wsj.com/articles/pentagon-asking-military-bases-to-remove-huawei-
zte-phones-1525262076?mod=djemalertNEWS&ns=prod/accounts-wsj&ns=prod/
accounts-wsj&ns=prod/accounts-wsj&ns=prod/accounts-wsj&ns=prod/
accounts-wsj&ns=prod/accounts-wsj.
    \5\Federal Communications Commission Notice of Proposed Rulemaking, 
Protecting Against National Security Threats to the Communications 
Supply Chain Through FCC Programs, FCC 18-42 (Apr. 18, 2018).
---------------------------------------------------------------------------
    Then, inexplicably, on May 13, 2018, President Trump 
tweeted, without warning or explanation, that he had spoken 
with President Xi of China and that he was directing the 
Commerce Department to work to save ZTE and Chinese jobs.\6\ It 
is unclear whether the President familiarized himself with the 
IC's significant concerns about ZTE or whether there was any 
engagement with the IC or DHS prior to tweeting this new policy 
on ZTE. What we do know is that two days before the 
announcement, the Chinese government agreed to help finance the 
development of a Trump-branded resort property in Indonesia, 
offering roughly $500 million toward construction of the 
project. We also know that a day after the President tweeted 
about easing sanctions on ZTE, the company hired Bryan Lanza, a 
former Trump Campaign staffer to lobby on its behalf.
---------------------------------------------------------------------------
    \6\Twitter, Donald J. Trump, @realDonaldTrump (May 13, 2018 at 
11:01 AM).
---------------------------------------------------------------------------
    I introduced this Resolution of Inquiry in response to 
urgent warnings from national security experts, including the 
Director of National Intelligence and top officials at the 
Federal Bureau of Investigation, the Central Intelligence 
Agency, and the National Security Agency, among others, that 
the use of ZTE products could create an access point for the 
Chinese government to conduct espionage.\7\ Consideration of H. 
Res. 898 provided Members of the Committee on Homeland Security 
with the opportunity to send a strong statement of concern 
about the direction the Trump Administration is going on this 
national security matter.
---------------------------------------------------------------------------
    \7\Testimony of Daniel R. Coats, Director of National Intelligence, 
Michael Pompeo, CIA Director, Adm. Michael Rogers, NSA Director, and 
Chris Wray, FBI Director, before the U.S. Senate Select Committee on 
Intelligence hearing entitled Worldwide Threats (Feb. 13, 2018).
---------------------------------------------------------------------------
    The Resolution of Inquiry would have forced DHS to provide 
Congress with information to get a better understanding of the 
implications, particularly the cybersecurity implications, of 
easing sanctions against ZTE. Given that the Pentagon was in 
the process of barring the sale of ZTE devices on military 
bases, it seems reasonable that DHS would have conducted its 
own investigations and arrived at its own national security 
conclusions. Unfortunately, the Majority chose to stay silent 
on this urgent national security issue and unanimously voted to 
report the measure unfavorably to the House of Representatives. 
With this vote, the Majority essentially decided to look away 
as the Trump Administration pursued efforts to relax its 
punishment of ZTE, discounting the significant national 
security concerns voiced by DOD, the IC, security experts and 
U.S. allies. The day after the markup, Secretary of Commerce 
Wilbur Ross announced that the seven-year ban on ZTE buying 
American parts would be relaxed, as the company had agreed to 
pay a $1 billion fine and adopt a new compliance regime.
    Congress has a responsibility to be a check on the 
Administration. By voting down H. Res. 898, the Majority chose 
to sit on the sidelines and let the Trump Administration ease 
sanctions on a company that DOD, the IC, security experts and 
U.S. allies believe to be a threat to our national security. As 
such, I dissent against the Committee's decision to stand in 
the way of oversight of this urgent national security matter.
                                        Bennie G. Thompson,
                                                    Ranking Member.

                                  [all]
```