ZTE share price soars after USA signs deal to lift ban

13 July, 2018, 07:42 | Author: Eric Barnett
  • U.S. agrees to lift ban on ZTE after signing escrow agreement

"We strongly oppose the June 2018 deal with ZTE negotiated by the Commerce Department's Bureau of Industry and Security (BIS) to lift the seven-year ban against the export of USA parts and components to ZTE", the senators wrote. After many suspensions, fines and a total trade ban, now the DoC has announced on Twitter that the agreement is about to be finalized.

However, as a favour to Chinese President Xi Jinping, US President Donald Trump ordered the Commerce Department to ease the penalties and replace it with an order to pay a $1 billion fine and put $400 million in an escrow account to cover any future penalties for violations.

All those fines add up to a lot of money, but with U.S. businesses providing as much as 30 percent of the components used in ZTE products, it's no surprise that the company is willing to do what it takes to resume trade with American firms. Everything could have been over if ZTE had said it was some miscommunication, but the United States found out the company deliberately ignored the embargo and went ahead with Iranian deal.

"The ZTE settlement represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case", the Commerce Department said in a statement.

The Trump administration in April announced a seven-year ban on USA exports to ZTE after it said the company violated sanctions agreements by selling American technology to Iran and North Korea. Among other things, ZTE was barred from doing business with US companies, a move many in the USA and China believed would serve as a death sentence for the firm. The reprieve for ZTE coincides with a new Trump administration threat of 10 percent tariffs on US$200 billion of Chinese goods.

A measure to reinstate the prohibition on allowing ZTE to buy from US suppliers, pushed by Sens.

In addition, the company must hire an outside compliance monitor selected by the Commerce Department.

A controversial monitor appointed to a three-year term by a federal judge in Texas as part of last year's guilty plea already is in place.

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 approved a version of the NDAA with that amendment. "The administration's bad ZTE deal will undermine our national and economic security", US Senator Chuck Shumer said in a statement. He said he hopes his Republican colleagues in the House and Senate will "maintain the Senate's strong language in the defence bill". It also broke news of the ban in April.



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