ZTE edges closer to resuming United States business

Galtero Lara
Julio 13, 2018

ZTE is one step closer to normalcy.

Things started to look a bit brighter for the company as President Trump said he was working with the Chinese government to get ZTE back up and running and, indeed, in June it was reported that ZTE had worked out the beginning of a deal with the US government, and a signed agreement got the company closer to getting back up and running.

ZTE was initially blocked from trading with USA component manufacturers due to breaching trade embargo between the United States and Iran.

The Commerce Department struck a new deal with ZTE on June 7 that would allow the company to resume buying from USA suppliers on the condition that it put the $400 million into an escrow account and pay a $1 billion fine, which it recently did. 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".

But the US Commerce Department defended the government's position, saying the settlement "represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case".

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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 United States technology to Iran and North Korea.

Additionally, Rep. Mac Thornberry (R-Texas), the chairman of the House Armed Services Committee, has said he does not want passage of the NDAA to be held up by the ZTE amendment, or anything that is not strictly a defense issue. The reprieve for ZTE coincides with a new Trump administration threat of 10 percent tariffs on US$200 billion of Chinese goods. ZTE's shares were suspended for nearly two months after the ban was imposed and have lost about half their value. The department missed a 30-day deadline to choose the monitor, but said on Wednesday the timetable was adjusted to conduct "due diligence".

A little after that, the U.S. Senate voted to reinstate the sales ban on ZTE, citing national security as their reasoning. The measure could still be killed when Senate and House of Representatives meet in the coming weeks to forge a compromise version of the bill. He called the deal "terrible", adding that it would undermine USA national and economic security.

Reuters revealed on June 5 that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms.

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