US lifts ban on exports to China's ZTE

Andrew Cummings
July 15, 2018

ZTE was recently allowed to resume some sales in the US earlier this month, after paying a fine, replacing their entire executive board, and hiring a USA affiliated monitor for business operations moving forward. Warner that would reinstate penalties against ZTE in their upcoming NDAA FY2019 Conference Report.

The Department of Commerce on Friday lifted a ban on U.S. companies selling goods to ZTE, allowing China's second-largest telecommunications equipment maker to resume business.

The reprieve follows threats by the Trump administration this week to impose 10 percent tariffs on $200 billion of Chinese goods in a trade war.

The senators not only requests that the penalties be reinstated, but that the USA henceforth prohibit all government and military personnel from "using or procuring equipment from, or entering into contracts with ZTE or Huawei", because of the potential espionage threat which the companies pose. In addition to violating the terms of the settlement, the company lied to the US about reprimanding employees involved in the illegal actions. BIS imposed this seven-year ban and other penalties against ZTE in April 2018 in response to its numerous violations of US export controls and sanctions laws.

ZTE pleaded guilty and settled with Commerce previous year over the sanctions violations.

The $400 million will stay in an escrow account for as long as 10 years to provide the US government access to the money if ZTE violates the latest settlement. The current ban could have lasted seven years.

The company also was required to replace its board of directors, retain outside monitors and put Dollars 400 million in escrow to cover any future violations - a final step it took this week.

Since the White House agreed to lift the ban, the company's stock has soared, as have the shares of its US suppliers, including Qualcomm, Intel, Broadcom, and Texas Instruments.

The letter notes the serious threat that the operations of Chinese telecom companies, and their agents represent to the national security of the United States of America.

The U.S. Senate included a provision to reverse the deal in a massive defense policy bill passed last month.

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