U.S. ban on China’s ZTE lifted

By Karen Freifeld

(Reuters) – The U.S. Department of Commerce on Friday lifted a ban on U.S. companies selling goods to ZTE Corp (HK:), allowing China’s second-largest telecommunications equipment maker to resume business. The Commerce Department had said it would remove the ban after ZTE paid a $1 billion penalty and placed $400 million in a U.S. bank escrow account as part of a settlement reached last month.

“While we lifted the ban on ZTE, the department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all U.S. laws and regulations,” Commerce Secretary Wilbur Ross said in an emailed statement.

ZTE did not immediately respond to requests for comment.

ZTE, which relies on U.S. components for its smart phones and networking gear, ceased major operations after the ban was ordered in April. The punishment came after the company made false statements about disciplining 35 employees involved with illegally shipping U.S.-origin goods to Iran and North Korea, Commerce officials said. ZTE pleaded guilty and settled with Commerce last year over the illegal shipments.

On Thursday, ZTE’s Hong Kong shares surged some 25 percent after Reuters broke news the United States had signed an escrow agreement that paved the way for ZTE to deposit the $400 million. The $1 billion penalty was sent to the U.S. Treasury last month.

The $400 million will stay in an escrow account for as long as 10 years to provide the U.S. government access to the money if ZTE violates the latest settlement.

The June settlement also required ZTE to change its board and management, and to allow the U.S. government unfettered site visits to verify U.S. components are being used as claimed.

It will now operate with a 10-year suspended ban hanging over its head, which the United States can activate if it finds new violations. The current ban could have lasted seven years.

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