US Lifts Trade Ban On ZTE

Daniel Fowler
July 15, 2018

"While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE's actions to ensure compliance with all United States laws and regulations", Commerce Secretary Wilbur Ross said in a statement yesterday.

The department imposed the ban in April over allegations that ZTE violated USA sanctions against Iran and North Korea, but the company's warnings that the penalty would put it out of business prompted the White House to negotiate a reprieve for the firm.

In order for the ban to be lifted, ZTE paid a $1.3 billion fine.

"While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE's actions to ensure compliance with all USA laws and regulations", Commerce Secretary Wilbur Ross said in a statement.

"While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE's actions to ensure compliance with all USA laws and regulations", said Secretary Ross. Three interlocking elements - a suspended denial order, the $400 million in escrow, and a compliance team selected by and answerable to the Department - will allow the Department to protect USA national security.

ZTE Corp. paid a $1 billion lump sum and put $400 million in escrow to pay a US sanctions penalty.

It estimated a preliminary net loss of 7.0-9.0 billion yuan ($1.05-1.34 billion) in January to June period versus a profit of 2.3 billion yuan the previous year, it said in a filing to the Hong Kong stock exchange. Now, they have to cash out $400 million in an escrow agreement, which will be held for the next 10 years.

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FILE PHOTO: A ZTE mobile telephone is shown at the annual Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., January 8, 2014.

Shares of smaller U.S. 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. Because ZTE relies on USA suppliers to make its smartphones.

The company, which employs some 80,000 people, got a limited one-month waiver last week to maintain existing networks and equipment. ZTE also replaced its entire board of directors and senior leadership.

It will now operate with a 10-year suspended ban hanging over its head, which the United States can activate if it finds new violations. Last month, the Senate voted unanimously to reinstate the ban on the company citing national security concerns.

"This sweetheart deal not only ignores these serious issues, it lets ZTE off the hook for evading sanctions against Iran and North Korea with a slap on the wrist", Warner said.

They pushed for the inclusion of legislation to reinstate the ZTE ban in the National Defense Authorization Act, or NDAA, a must-pass defence policy bill.

The fate of the ZTE amendment is not clear. It also broke news of the ban in April.

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