ZTE takes a step toward seeing its ‘death-penalty’ ban lifted

July 11, 2018

CHINA-US-TELECOMMUNICATION-ZTE

Chinese telecom giant ZTE still needs to deposit $400 million.


Johannes Eisele / AFP/Getty Images

ZTE is one step closer to normalcy.

The Chinese telecommunication company has signed an escrow agreement with the US Commerce Department to lift a ban against it dealing with American businesses. The ban will cease once ZTE deposits $400 million in the escrow account.

“The ZTE settlement represents the toughest penalty and strictest compliance regime the department has ever imposed in such a case,” a Commerce Department spokesperson said in an email statement. “It will deter future bad actors and ensure the department is able to protect the United States from those that would do us harm.”

The Commerce Department cited its “three-pronged compliance regime,” which includes the suspension of the ban, the escrow and an independent monitor.

ZTE is working with a limited number of US companies on a waiver granted by the Commerce Department last week. The waiver expires on Aug. 1 and ZTE is expected to be in compliance with US demands by then.

The Commerce Department issued the ban after ZTE violated the terms of a settlement by failing to fire employees who helped the company illegally ship equipment containing US technology to Iran and North Korea. The seven-year ban prevented ZTE from purchasing hardware supplies and services from American companies, which forced the Chinese tech giant to shut down its “major operating activities.” Analysts had called it a “death penalty” for the company.

Last month, the Commerce Department struck a deal that required ZTE to pay a total of $1.7 billion in penalties, including a $1 billion fine and the $400 million escrow deposit that will be held in case of future violations. ZTE has paid the $1 billion fine to the Treasury Department.

ZTE and the White House didn’t immediately respond to requests for comments.

Some politicians have complained about the agreement.

“Allowing ZTE to resume business is a direct betrayal of President Trump’s promise to be tough on China and protect American workers,” said Democratic Senator Chuck Schumer in a statement. He called the deal “terrible,” adding that it would undermine US national and economic security.

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