ZTE shares surge 22% as U.S. sanctions lift moves step closer

Marco Green
July 13, 2018

The Commerce Department has put several new restrictions on ZTE as part of the agreement that allows it to continue doing business with US companies. After many suspensions, fines and a total trade ban, now the DoC has announced on Twitter that the agreement is about to be finalized. The department has announced in a statement that an escrow agreement had been signed. 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.

But the US Commerce Department defended the government's position, saying the settlement "represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case".

ZTE has been banned from the United States since April after breaching an agreement on doing deals with Iran and North Korea.

The ban on ZTE in the U.S. will now be lifted when the company pays $400m into an escrow account - on top of the $1 billion fine it has already had to pay. The US$1 billion penalty is in addition to almost US$900 million ZTE paid past year.

ZTE and the White House didn't immediately respond to requests for comments. Shares of smaller USA suppliers, which are more dependent on ZTE, pared losses after the news, including optical component makers Acacia Communications Inc, Oclaro Inc and Lumentum Holdings Inc.

The company last week received a limited one-month reprieve from the Commerce Department to maintain existing networks and equipment. It also will operate for the next 10 years under a suspended ban.

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

They've argued that ZTE and other Chinese technology firms are a threat to US national security given their close ties to the Chinese government.

Republicans Marco Rubio, Tom Cotton and Roy Blunt, together with Democrats Chris Van Hollen, Mark Warner and Bill Nelson sent a letter to the Senate and House Armed Services Committees on Thursday to urge the chairmen, Senator John McCain and Representative Mac Thornberry, to include the amendment in the defence bill.

"The administration's awful ZTE deal will undermine our national and economic security, which is exactly why the Senate overwhelmingly passed bipartisan legislation to retroactively tear it apart", he said.

Reuters revealed on June 5 that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms.

Other reports by Click Lancashire

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