ZTE clears hurdle for US ban to be lifted

Hannah Boland
ZTE - REUTERS

Chinese technology company ZTE has cleared a hurdle towards resuming operations in the US, after signing an escrow deal with the country's commerce department.

ZTE, a state-owned telecoms equipment maker, was banned from doing business with American suppliers three months ago, after having last year pleaded guilty to bypassing US sanctions against Iran and North Korea.

The company had initially paid a $1.1bn (£800m) fine and was allowed to continue buying components from US firms, but the commerce department decided to impose further restrictions on ZTE in April after claiming it had not disciplined the workers who sold the equipment on to customers in the sanctioned countries, as it had agreed to under its earlier plea deal. 

In order to have the ban lifted, ZTE said it would comply with a number of requirements, including paying a further $1bn penalty, which it did last month, and transferring $400m into an escrow account.

The commerce department said: “The ZTE settlement represents the toughest penalty and strictest compliance regime the department has ever imposed in such a case. It will deter future bad actors and ensure the department is able to protect the United States from those who would do us harm.”

The ban will be lifted once ZTE has completed the escrow deposit. The company did not respond to requests for comment.

The tough stance taken towards ZTE has come amid mounting tensions between the US and China, the latest development being President Donald Trump's unveiling of a list of $200bn worth of Chinese goods that would face a new 10pc tariff. 

The US and China last week imposed their first tranche of tariffs on one another's imports, in a move the Chinese Ministry of Commerce said had "ignited the largest trade war in economic history”.

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Mr Trump had seemed to offer ZTE a reprieve in May, ordering the Commerce Department to assist the company in getting "back into business fast", in what he said was "reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi".

According to White House trade advisor Peter Navarro Mr Trump had allowed the settlement deal "as a personal favour to the president of China as a way of showing some good will for bigger efforts".

However, the ban has been hugely damaging to ZTE, wiping out almost half its market value before shares were suspended last month.

ZTE is also required to completely overhaul its board and management under the settlement deal, and Mr Navarro told Fox that ZTE would be "shut down" if they do one more additional bad thing.

"It’s going to be three strikes you’re out on ZTE," he said.