China’s ZTE clears hur­dle to lift­ing US ban

Oman Daily Observer - - BUSINESS -

NEW YORK: The United States said that it signed an agree­ment with ZTE Corp that paves the way for the Chi­nese tech com­pany to re­sume op­er­a­tions af­ter a nearly three-month ban on do­ing busi­ness with Amer­i­can sup­pli­ers.

The ban on China’s No. 2 telecom­mu­ni­ca­tions equip­ment maker will be re­moved once the com­pany de­posits $400 mil­lion in an es­crow ac­count, the US Com­merce Depart­ment said in a state­ment an­nounc­ing that an es­crow agree­ment had been signed.

The ban, which was im­posed in April and caused ZTE to cease ma­jor op­er­a­tions, has been a source of fric­tion be­tween Wash­ing­ton and Bei­jing, which are en­gaged in an es­ca­lat­ing trade dis­pute.

ZTE did not im­me­di­ately re­spond to a re­quest for com­ment.

“To­day’s an­nounce­ment marks the be­gin­ning of the end of this long-run­ning saga,” said Wash­ing­ton at­tor­ney Dou­glas Ja­cob­son, who rep­re­sents ZTE sup­pli­ers.

The es­crow agree­ment is part of a $1.4 bil­lion set­tle­ment ZTE reached with the Com­merce Depart­ment last month to re­gain ac­cess to US sup­pli­ers, whose com­po­nents it re­lies on for its smart­phones and net­work­ing gear.

The ban was im­posed af­ter ZTE broke an agree­ment reached af­ter ZTE pleaded guilty in US fed­eral court last year for il­le­gally ship­ping US goods and tech­nol­ogy to Iran, in vi­o­la­tion of US sanc­tions.

The new set­tle­ment in­cludes a $1 bil­lion penalty that ZTE paid to the US Trea­sury last month and the $400 mil­lion in the es­crow ac­count that the United States could seize if ZTE vi­o­lates the lat­est set­tle­ment. The $1 bil­lion penalty is in ad­di­tion to nearly $900 mil­lion ZTE paid last year.

Once the ban is lifted, ZTE, which em­ploys around 80,000 peo­ple, is ex­pected to restart ma­jor op­er­a­tions. The re­prieve for ZTE co­in­cides with a new Trump ad­min­is­tra­tion threat of 10 per cent tar­iffs on $200 bil­lion of Chi­nese goods.

In its state­ment, the Com­merce Depart­ment said the ZTE ac­tion is a law en­force­ment mat­ter un­re­lated to broader dis­cus­sions of trade pol­icy.

“The ZTE set­tle­ment rep­re­sents the tough­est penalty and strictest com­pli­ance regime the depart­ment has ever im­posed in such a case,” the Com­merce Depart­ment said.

US Pres­i­dent Don­ald Trump tweeted in May that he had closed down ZTE and then let it re­open, al­though no agree­ment to lift the ban had yet been reached. He said he was work­ing with Chi­nese Pres­i­dent Xi Jin­ping to give ZTE “a way to get back into busi­ness, fast.” ZTE had said the ban threat­ened its sur­vival.

White House trade ad­viser Peter Navarro said last month that Trump de­cided to al­low ZTE to again buy US parts and com­po­nents as a per­sonal fa­vor to Xi to show good will for big­ger ef­forts.

US sup­pli­ers have been anx­ious to re­sume busi­ness since US Com­merce Sec­re­tary Wil­bur Ross an­nounced the set­tle­ment on June 7. ZTE paid over 200 US com­pa­nies more than $2.3 bil­lion in 2017, in­clud­ing Qual­comm Inc, In­tel Corp, Broad­com Inc and Texas In­stru­ments Inc.

Shares of smaller US sup­pli­ers, which are more de­pen­dent on ZTE, pared losses af­ter the news, in­clud­ing op­ti­cal com­po­nent mak­ers Aca­cia Com­mu­ni­ca­tions Inc, Oclaro Inc and Lu­men­tum Hold­ings Inc.

ZTE’S shares were sus­pended for al­most two months af­ter the ban was im­posed and have lost about half their value.

The com­pany last week re­ceived a lim­ited one-month re­prieve from the Com­merce Depart­ment to main­tain ex­ist­ing net­works and equip­ment.

Un­der the new set­tle­ment, ZTE was re­quired to change its board and man­age­ment within 30 days. It also will op­er­ate for the next 10 years un­der a sus­pended ban. The cur­rent ban could have lasted up to seven years.

In ad­di­tion, the com­pany must hire an out­side com­pli­ance mon­i­tor se­lected by the Com­merce Depart­ment. The depart­ment missed a 30-day dead­line to choose the mon­i­tor, but said on Wed­nes­day the timetable was ad­justed to con­duct “due dili­gence.”


ZTE logo is seen on an of­fice build­ing in Shang­hai.—

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