Exclusive: U.S. clears hurdle to lifting ban on China’s ZTE

July 11, 2018

(Reuters) – The United States signed an agreement with ZTE Corp (000063.SZ) that paves the way for the Chinese tech company to resume operations after a nearly three-month old ban on doing business with American suppliers, the U.S. Commerce Department said on Wednesday.

FILE PHOTO: The logo of China’s ZTE Corp is seen on the building of ZTE Beijing research and development center in Beijing, China June 13, 2018. REUTERS/Jason Lee

The ban on China’s No. 2 telecommunications equipment maker will be removed once the company deposits $400 million in an escrow account, the Commerce Department said, which it can do now that Commerce officials signed an escrow agreement.

FILE PHOTO: The logo of China’s ZTE Corp is seen at the lobby of ZTE Beijing research and development center building in Beijing, China June 13, 2018. REUTERS/Jason Lee

“Once ZTE has completed the $400 million escrow deposit,” the Commerce Department said in a statement, it will “issue a notice lifting the denial order.” ZTE did not immediately respond to a request for comment.

The escrow agreement is part of a $1.4 billion settlement ZTE reached with the U.S. Commerce Department last month to regain access to U.S. suppliers, whose components it relies on for its smart phones and networking gear.

The escrow account gives the United States an additional $400 million if ZTE violates the settlement. ZTE paid the $1 billion fine to the U.S. Treasury last month.

Once lifted, ZTE, which employs around 80,000 people, is expected to restart major operations, which would remove a sticking point within the broader U.S.-China trade war. The reprieve for ZTE coincides with a new Trump administration threat of 10 percent tariffs on $200 billion of Chinese goods.

In its statement, the Commerce Department said the ZTE action is a law enforcement matter unrelated to broader discussions of trade policy.

Reporting by Karen Freifeld; Editing by Cynthia Osterman

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