ZTE clears hurdle for USA ban to be lifted

13 Juillet, 2018, 07:42 | Auteur: Auguste Feret
  • President Trump welcomes Chinese President Xi Jinping at the Mar-a Lago Club in Palm Beach Florida U.S

The Commerce Department on Wednesday took a major step to loosen its restrictions on the controversial Chinese telecommunications company ZTE Corp., signing an escrow agreement that paves the way for the firm to continue doing business with US companies.

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

The Commerce Department said Wednesday's agreement established an escrow account, which allows the company to transfer $400 million in reserves.

It was also ordered to replace its board of directors and retain outside monitors.

ZTE could soon be back to work after signing a significant deal with the U.S. government. Still, it is sharply down from the HK$25.60 it was at before trading was suspended after the sanctions were announced in April.

What started as a ban which prevented USA -based companies from selling parts to ZTE eventually led to the smartphone maker ceasing its main business operations. ZTE had said the ban threatened its survival. Wednesday marks the start of negotiations on legislation that will try to balance concerns that ZTE presents a security risk with efforts to get the company back into business.

ZTE, China's second largest telecoms manufacturer, depends on US-made components for the production of its handsets. U.S. ZTE paid over 200 U.S. companies more than US$2.3 billion in 2017, including Qualcomm Inc, Intel Corp, Broadcom Inc and Texas Instruments Inc. ZTE's shares were suspended for nearly two months after the ban was imposed and have lost about half their value.

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Last week, the Commerce Department temporarily lifted part of the ban, but that only applied to the maintenance of existing networks and equipment. The current ban could have lasted up to seven years. The company must also allow unfettered site visits to verify that U.S. components are being used correctly, and post calculations of USA parts in its products on a public website.

They've argued that ZTE and other Chinese technology firms are a threat to USA national security given their close ties to the Chinese government.

The Senate paved the way for a showdown with Trump over the issue last month, when it passed an annual defense policy bill including an amendment attempting to reverse the deal. But because it is not in the House version of the bill, lawmakers from the Senate and House armed services committees are now negotiating a compromise. "The administration's bad ZTE deal will undermine our national and economic security", US Senator Chuck Shumer said in a statement.

The Senate and the House are in the process of reconciling the differences between the two versions.

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

A US investigation into ZTE was launched after Reuters reported in 2012 the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known USA technology companies.

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