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ZTE closer to resuming business

Updated: 2018-07-12 23:58
ZTE Logo seen at the Mobile World Congress held in Barcelona, Spain, Feb 28, 2018. [Photo/VCG]

The United States said on Wednesday that it signed an agreement with ZTE Corp that paves the way for the Chinese tech company to resume operations after a nearly three-month ban on doing business with American suppliers.

The ban on China's No. 2 telecommunications equipment maker will be removed once the company deposits $400 million in an escrow account, the US Commerce Department said in an emailed statement announcing that an escrow agreement had been signed.

"Once the monitor is selected and brought on board, the three-pronged compliance regime — the new 10-year suspended denial order, the $400 million escrow, and the monitor — will be in place," Commerce said in the statement.

Most operations of the Shenzhen-based company were suspended in April after the US government slapped a seven-year ban on its purchase of crucial US components, including chips, allegedly for breaching sanctions on the export of goods to Iran.

The company is currently operating on a temporary waiver that expires Aug 1.

"Today's announcement marks the beginning of the end of this long-running saga," said Washington attorney Douglas Jacobson, who represents ZTE suppliers.

Once the ban is lifted, ZTE, which employs around 80,000 people, is expected to restart major operations. The reprieve for ZTE coincides with a new Trump administration threat of 10 percent tariffs on $200 billion of Chinese goods.

The Commerce Department said the ZTE action is a law enforcement matter unrelated to broader discussions of trade policy.

US suppliers have been anxious to resume business since US Commerce Secretary Wilbur Ross announced the settlement on June 7. ZTE paid over 200 US companies more than $2.3 billion in 2017, including Qualcomm Inc, Intel Corp, Broadcom Inc and Texas Instruments Inc.

Shares of smaller US suppliers, which are more dependent on ZTE, pared losses after the news.

ZTE's shares were suspended for almost two months after the ban was imposed and have lost about half their value.

On July 2, the US Commerce Department issued a "limited service authorization" to ZTE, allowing some of its business activities to resume temporarily — until Aug 1.

The authorization allows ZTE to conduct business necessary to maintain existing networks and equipment in the US.


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