China's ZTE expected to take last step to lift ban on US suppliers


ZTE, China's second-largest telecommunications equipment maker, ceased major operations after the United States imposed a ban in April.
ZTE, China's second-largest telecommunications equipment maker, ceased major operations after the United States imposed a ban in April. PHOTO: AFP

WASHINGTON (REUTERS) - China's ZTE is expected to deposit US$400 million (S$543 million) in an escrow account in a US bank in the"next couple of days," the last step the Chinese company must take before a ban on US suppliers can be lifted, a US Department of Commerce official told Reuters on Friday (June 22).

ZTE, which makes smart phones and networking gear, agreed to pay a US$1 billion penalty and put US$400 million in escrow as part of a settlement it reached on June 7 with the Commerce Department to regain access to the US market, which it needs for components.

ZTE, China's second-largest telecommunications equipment maker, ceased major operations after the United States imposed the ban in April. The company had broken a prior agreement, the Commerce Department said, by making false statements about disciplining executives involved in illegally shipping US goods to Iran and North Korea, which are subject to US sanctions. As a result of the violations, the company last year agreed to pay nearly US$900 million in civil and criminal penalties to US authorities.

The escrow account in the new settlement is designed to allow the US government access to the US$400 million if ZTE violates the latest deal.

An escrow agreement, which defines the conditions under which the money could be released, was in the process of being finalised, sources told Reuters on Friday.

ZTE is hopeful the US$400 million can be deposited on or before Monday, one person familiar with the matter said on Friday.

The company paid the US$1 billion penalty last week, Reuters reported on Tuesday, citing sources.

 
 

Spokespeople for ZTE did not immediately respond to requests for comment.

The decision to lift the ban was made by President Donald Trump as a way of showing goodwill to the president of China, White House trade adviser Peter Navarro has said.

The Republican-controlled US Senate passed legislation this week that would overturn the settlement, in a rare rebuke to Trump.

But the measure, an amendment to a massive defense policy Bill, is still several steps from becoming law, and the White House has said it will push its allies in Congress not to let the provision move forward.

ZTE paid Qualcomm and over 200 other US companies more than US$2.3 billion in 2017, including over US$100 million each to Intel, Broadcom and Texas Instruments , a senior ZTE official told Reuters last month.

Under the new Commerce Department settlement, ZTE agreed to numerous conditions beyond monetary penalties, including changing its board and leadership within 30 days.