The United States government has made a deal with Chinese telecommunications giant ZTE that, once completed, will lift the ban preventing the company from working with American suppliers. The agreement eases tensions in the U.S.-China trade war because the seven-year denial order, which the Trump administration imposed in April after ZTE violated sanctions against North Korea and Iran, was a major point of contention between the two countries.
— U.S. Commerce Dept. (@CommerceGov) July 11, 2018
According to a statement from the Commerce Department, once ZTE completes a $400 million escrow payment, the department’s Bureau of Industry and Security (BIS) will lift the ban. The Commerce Department says “the ZTE settlement represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case. It will deter future bad actors and ensure the Department is able to protect the United States from those that would do us harm.”
Many U.S. lawmakers are still concerned about the security repercussions of the deal, however, and a bipartisan group of senators introduced legislation last week that could potentially restore some of the penalties imposed on ZTE.
The denial order was imposed because the Commerce Department claimed that ZTE violated U.S. laws against selling equipment containing American technology to Iran and North Korea, and not only failed to follow the terms of a 2017 agreement with the Department of Justice, but also lied to the U.S. The ban cut off access to several of ZTE’s key suppliers, including Qualcomm, and was severe enough that it was described as a “death penalty” for the company, which reportedly expected to lose $3 billion as a result.
But ZTE quickly became a pawn in the U.S-China trade wars and the Trump administration said in May that the company could continue buying from U.S. suppliers if it paid a fine of at least $1.3 billion and replaced its senior management and board. ZTE’s new management team was put into place last week, with new CEO Xu Ziyang promising stronger compliance procedures.