US signs deal to lift restrictions on ZTE - TechCentral

US signs deal to lift restrictions on ZTE

The Donald Trump administration said ZTE took another step toward ending a US ban on the company doing business with American suppliers, a key Chinese government demand amid an escalating trade dispute between the world’s two largest economies.

The Chinese telecommunications giant has signed an escrow agreement with the US commerce department and the ban will be lifted as soon as the company deposits US$400-million in escrow, the department said in an e-mailed statement Wednesday. The company is currently operating on a temporary waiver that expires on 1 August.

“Once the monitor is selected and brought on board, the three-pronged compliance regime — the new 10-year suspended denial order, the $400-million escrow, and the monitor — will be in place,” commerce said in the statement. “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 US from those that would do us harm.”

A person familiar with the matter said the escrow payment should be completed within a day.

ZTE representatives met with commerce department officials on Monday to discuss a path forward for the deal, people familiar with the meeting said on condition of anonymity.

The Trump administration in April announced a seven-year ban on US exports to ZTE after it said the company violated sanctions agreements by selling American technology to Iran and North Korea. The ban had forced ZTE to announce it was shutting down.

President Trump reversed course in May, saying he was reconsidering penalties on ZTE as personal favour to Chinese President Xi Jinping. Later that month, his administration announced it would allow the company to stay in business after paying a $1.3-billion fine, changing its management and providing “high-level security guarantees”.

ZTE took a major step forward in meeting the White House’s conditions by sacking its entire board and appointing a new chairman last month. ZTE’s new management now faces the challenge of rebuilding trust with phone companies and corporate customers. The company is said to be facing at least $3-billion in total losses from the months-long moratorium, which cut off the flow of chips and other components it needed to make its networking gear and smartphones.

A bipartisan group of US lawmakers remains concerned about ZTE’s threat to US national security and is pushing for legislation aimed at restoring harsher penalties. Wednesday marks the start of negotiations on legislation that will try to balance concerns that ZTE presents a security risk with efforts to get the company back into business.  — Reported by Jennifer Jacobs and Jenny Leonard, (c) 2018 Bloomberg LP