US Lifts ban on suppliers selling to China's ZTE

US Lifts ban on suppliers selling to China's ZTE

The US Department of Commerce lifted a ban on US companies to sell goods to ZTE on Friday, allowing China's second-largest telecommunications equipment manufacturer to resume business.

The Commerce Department removed the ban soon after ZTE deposited $ 400 million into a US bank trust account as part of an agreement reached last month. The deal also included a $ 1 billion fine that ZTE paid to the US Treasury in June.

"The department will remain vigilant as we closely monitor ZTE's compliance with all US laws and regulations," said Trade Minister Wilbur Ross in a statement that described the terms of the agreement as the most stringent ever such a case were imposed.

The terms allow the department to protect US national security, Ross said.

The government has argued with its own lawmakers about China-related issues, and this was no different. On Friday, Senator Marco Rubio, a Republican, criticized the lifting of the ban.

"ZTE should be taken out of business, there is no 'deal' with a state-run company that uses the Chinese government and Communist Party to spy on us and steal where the Americans are gaining," said Rubio in a statement.

A photo circulating among employees at midnight showed that ZTE's new executive director and ten other managers were holding up the news on a company screen with a thumbs up, as one person knows is familiar.

The postponement follows the Trump government's threats this week to impose ten percent tariffs on $ 200 billion of Chinese goods in a trade war.

ZTE did not respond to requests for comment.

ZTE, which relies on components from the United States for its smartphones and network devices, has discontinued larger operations following the ban in April.

US President Donald Trump tweeted in May that he closed ZTE and reopened it, although no agreement had been reached. White House Trade Adviser Peter Navarro said Trump had agreed last month to lift the ban as a gesture of goodwill towards Chinese President Xi Jinping.

The company made false statements about the disciplinary measures against 35 employees who illegally send goods from the US to Iran and North Korea, officials from the Ministry of Commerce said. ZTE pleaded guilty to sanctions last year.

ZTE paid $ 892 million in penalties for the United States in connection with the compensation and guilty verdict of 2017. The last $ 1.4 billion deal is added.

The $ 400 million will be held in trust for another 10 years to give the US government access to the money if ZTE violates the June ruling.

ZTE's shares in Hong Kong rose about 24 percent on Thursday after Reuters broke news that the United States had signed an escrow agreement that paved the way for ZTE to deposit $ 400 million.

US-listed ZTE shares fell 2.4 percent on Friday to $ 3.70. The news came after markets in Asia closed.

US shares Acacia Communications and Lumentum Holdings rose more than three percent in the news before rising less than one percent.

ZTE paid more than $ 2.3 billion to US companies in 2017, including Qualcomm, Intel, Broadcom, and Texas Instruments.

The company, which employs approximately 80,000 people, received a limited one-month waiver last week to retain existing networks and equipment.

ZTE has replaced its Board of Directors and Senior Management, as required by the June Agreement.

It will now function with a 10-year suspended ban hanging over the head that the United States can activate if it finds new violations. The current ban could have lasted seven years.

Many US legislators see the company as a threat to national security, and on Thursday a group of Republican and Democratic US senators urged the reintroduction of ZTE's sentences.

The US Senate paved the way for a power struggle with Trump last month when he passed an annual Defense Policy bill with an amendment seeking to reverse the deal. His fate is unclear.

Reuters reported US claims for a deal on June 1, and on June 5, revealed that ZTE had signed a preliminary agreement with the Commerce Department, along with the penalty and other terms. It also broke news of the ban in April.

A US investigation into ZTE was launched after Reuters reported in 2012 that it had signed contracts for several million dollars worth of hardware and software shipments to Iran from some of the best-known US technology companies.

© Thomson Reuters 2018

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