The decision by the U.S. Department of Commerce will allow the Chinese vendor to resume operations
The U.S. Department of Commerce (DoC) formally lifted a seven-year ban on U.S. companies selling components and software to Chinese vendor ZTE, after it complied with all the requirements of a settlement agreed to in June, the DoC said in a statement.
On July 13, Secretary of Commerce Wilbur Ross announced that ZTE had placed $400 million in escrow at a U.S. bank. Shortly after the deposit, the Department lifted the denial order on ZTE. The escrow funds are in addition to the $1 billion penalty imposed by Commerce that ZTE paid to the U.S. Treasury last month.
“While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all U.S. laws and regulations,” said Secretary Ross in a statement. “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 U.S. national security.”
The DoC said that the $1.4 billion paid under the new settlement agreement are in addition to the $892 million in penalties ZTE has already paid to the U.S government under a March 2017 settlement agreement.
Under the current settlement agreement, ZTE will also be required to retain a team of special compliance coordinators selected by and answerable to the Department’s Bureau of Industry and Security (BIS) for a period of 10 years. This team will monitor on a real-time basis ZTE’s compliance with U.S. export control laws.
ZTE said in a statement the department’s BIS terminated the denial order and removed it from the denied persons list, effective immediately. But the new agreement also includes a denial order that BIS can activate immediately in the event of additional violations during the ten-year probationary period.
The Chinese vendor has elected a new board and appointed a new company president as part of the agreement with the U.S government.
That seven-year ban had been imposed by the Department of Commerce’s BIS in March this year after the vendor allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea. In early May, ZTE said it had ceased its major operating activities due to the export ban.
On July 13, ZTE said it expects to record a heavy net loss in the first half of 2018 as a result of the ban imposed by the U.S authorities.
In a preliminary statement issued to investors, ZTE highlighted the loss could total between CNY7 billion ($1 billion) and CNY9 billion, down from a profit of nearly CNY2.3 billion in the same period of 2017. The change represents a decrease of between 400% and 500%, it added.
ZTE attributed the drop to both its suspension of operations as a consequence of the ban and the $1 billion fine it agreed to pay as part of a settlement agreement with the U.S Department of Commerce.
