Reprieve for ZTE as US lifts ban on sales
• Chinese firm pays desposit in bank escrow account
The US department of commerce on Friday lifted a ban on US companies selling goods to ZTE, allowing China’s secondlargest telecommunications equipment maker to resume business.
The department removed the ban shortly after ZTE deposited $400m in a US bank escrow account as part of a settlement reached last month. The settlement also included a $1bn penalty that ZTE paid to the US Treasury in June.
“The department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all US laws and regulations,” Commerce Secretary Wilbur Ross said in a statement that described the terms of the deal as the strictest ever imposed in such a case.
The terms will allow the department to protect US national security, Ross said.
On Friday, Senator Marco Rubio, a Republican, criticised the lifting of the ban.
“ZTE should be put out of business. There is no ‘deal’ with a state-directed company that the Chinese government and Communist Party uses to spy and steal from us where Americans come out winning,” Rubio said in a statement.
A photograph circulating among employees around midnight on Friday showed ZTE’s new CEO and 10 other managers each giving a thumbs-up to the news, which was flashed on a screen at the company, according to a person familiar with the matter.
The reprieve follows threats by the Trump administration last week to impose 10% tariffs on $200bn of Chinese goods in a trade war.
ZTE, which relies on US components for its smartphones and networking gear, ceased major operations after the ban was ordered in April.
US President Donald Trump tweeted in May that he had closed down ZTE and let it reopen, although no agreement had been reached. White House trade adviser Peter Navarro said last month Trump agreed to lift the ban as a goodwill gesture to Chinese President Xi Jinping.
The company had made false statements about disciplining 35 employees involved with illegally shipping US-origin goods to Iran and North Korea, commerce department officials said. ZTE pleaded guilty last year over the sanctions violations.
ZTE paid $892m in penalties to the US in connection with the 2017 settlement and guilty plea. The latest $1.4bn deal comes on top of that.
The $400m will remain in escrow for as long as 10 years to provide the US government access to the money if ZTE violates the June settlement.
On Thursday, ZTE’s Hong Kong shares surged about 24% after Reuters broke the news that the US had signed an escrow agreement to pave the way for ZTE to deposit the $400m.
ZTE’s US-listed shares fell 2.4% to $3.70 on Friday.
Shares of US suppliers Acacia Communications and Lumentum Holdings rose more than 3% on the news.
ZTE paid US firms more than $2.3bn in 2017, including Qualcomm, Intel, Broadcom and Texas Instruments.
The company, which employs about 80,000 people, got a limited one-month waiver last week to maintain existing networks and equipment.
ZTE has replaced its board of directors and senior management, as required by the June settlement, the Commerce Department noted.
It will now operate with a 10year suspended ban hanging over its head, which the US can activate if it finds new violations. The current ban could have lasted seven years.
Many US lawmakers see the company as a national security threat and, on Thursday, a group of Republican and Democratic senators urged that ZTE’s penalties be reinstated.
The US Senate paved the way for a showdown with Trump over the issue last month when it passed an annual defence policy bill with an amendment attempting to reverse the deal.
Reuters reported on US demands for a deal on June 1, and on June 5 revealed that ZTE had signed a preliminary agreement with the Commerce Department.
A US investigation into ZTE was launched after Reuters reported in 2012 that the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known US technology groups.
THERE IS NO ‘DEAL’ WITH A STATEDIRECTED COMPANY THAT THE CHINESE USE TO SPY AND STEAL FROM US