Why it matters: The US and China might be locked in a trade war, but it appears that the ZTE ban is one area where Donald Trump isn’t clamping down hard. However, lifting the sanctions is costing the Chinese giant over one billion dollars, and there’s still a chance that Congress will stop the deal.
Could the end of the ZTE sanctions saga be in sight? It certainly looks that way after it signed an agreement with the American government to resume business with US suppliers, potentially bringing to an end to a ban that saw the Chinese firm cease its major operations.
As reported in June, ZTE had reached a preliminary deal with the Trump administration to lift the seven-year ban. The US Department of Commerce handed out the punishment when ZTE broke an agreement after pleading guilty last year to violating US sanctions by shipping US tech to Iran. The settlement saw it pay $1 billion to the US treasury. Now, it needs to pay $400 million into an escrow account that the US will take if it violates any more rules. This is in addition to the $900 million ZTE paid in penalties last year.
All those fines add up to a lot of money, but with US 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. One month after the ban was delivered, ZTE was forced to cease “major operating activities.”
Another part of the deal to remove the sanctions saw ZTE recently replace its entire executive team, which included its chief executive officer, chief technology officer, and chief financial officer. This followed the resignation of its board of directors a week earlier. The company must also allow unfettered site visits to verify that US components are being used correctly, and post calculations of US parts in its products on a public website.
Last week, the Commerce Department temporarily lifted part of the ban, but that only applied to the maintenance of existing networks and equipment.
The news may have boosted the company's stock price but it doesn’t mean ZTE is in the clear. The deal could still be shot down by Congress after the Senate voted against it last month.