The export ban will be lifted once the Chinese company completes a $400 million escrow payment and a monitor is selected
Chinese vendor ZTE has signed an agreement with the U.S. government which will allow the company to resume doing business with American suppliers.
Under the terms of the deal between ZTE and the Department of Commerce, once the vendor completes a $400 million escrow payment, the department’s Bureau of Industry and Security (BIS) will fully lift the seven-year export ban. The U.S. signed the deal Wednesday, according to Reuters.
ZTE shares surged over 20% in Hong Kong trading on Thursday morning following the announcement that the company was close to achieving a complete lifting of the US ban. The vendor’s shares also rose by the 10% daily limit in the Shenzhen stock exchange.
“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,” the Department of Commerce said in a statement.
“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. As part of a deal between the U.S government and the company, ZTE is also required to hire a team of “special compliance coordinators” that will be chosen by BIS and answerable to the U.S. agency, not ZTE. For 10 years, those compliance coordinators will monitor on a real-time basis ZTE’s compliance with U.S. export control laws.
Earlier this week, ZTE representatives had meetings with Commerce Department officials to discuss the final details of the agreement.
That seven-year ban had been imposed by the Department of Commerce’s BIS 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, which also affected business of U.S firms including Qualcomm, Dolby and Google, among others.
Last month, the U.S government reached an agreement with ZTE which would allow the firm to resume business. Under the terms of the agreement, the Chinese company was forced replace its leadership and pay $1 billion to the U.S. government as part of a settlement agreement.
Last week, the U.S. government has issued a limited service authorization which allowed the Chinese vendor ZTE to resume certain activities. The Commerce Department’s Bureau of Industry and Security (BIS) said that this partial authorization is valid from July 2 until August 1.
The authorization will allow the Chinese vendor to support existing networks or equipment under contracts signed on or before April 15, when the Trump administration blocked U.S. companies from selling components to ZTE.
BIS also authorized parties to “make and receive payments to and from ZTE from transactions and activities lawful pursuant of the authorization.”
The limited authorization also enables ZTE to service and support cell phones available to the public before April 15.
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