U.S. Lifts Ban That Kept ZTE From Doing Business With U.S. Suppliers

The Trump administration on Friday lifted a ban on Chinese telecommunications company ZTE that had pushed the company to the brink of financial collapse by preventing it from acquiring parts and software from U.S. companies.

The ban, imposed in April to punish ZTE for failing to live up to an earlier agreement related to violating U.S. sanctions against Iran and North Korea, was removed after the company met the conditions of a settlement, the Commerce Department said in a news release.

Under the deal, ZTE was required to pay a $1 billion penalty, put $400 million in escrow with a U.S. bank, overhaul its leadership and allow a team of compliance monitors to be installed inside the company for 10 years.

Commerce Secretary Wilbur Ross said in a statement that ZTE, China’s second-largest telecommunications firm after Huawei, would remain under closer scrutiny even after being dropped from the department’s “denied persons list.”

“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,” Ross said.

ZTE did not immediately respond to requests for comment. Its shares rose nearly 24 percent in trading in Hong Kong on Thursday after the Commerce Department said it was on the verge of lifting the ban.

The United States originally found ZTE in violation of sanctions on Iran and North Korea in 2016 and imposed a $892 million penalty on the company last year.

In April, amid rising trade tensions between the United States and China, the Commerce Department barred ZTE’s U.S. suppliers from doing business with the company for failing to rectify the sanctions issue. Because ZTE relies heavily on U.S. components to produce its smartphones and telecommunications equipment, the move threatened to drive the company out of business.

In May, President Donald Trump wrote on Twitter that he and President Xi Jinping of China were working together on a lifeline for ZTE. Trump also said he had directed the Commerce Department to “get it done.” A deal was announced June 7.

The administration deal to save ZTE has been criticized by lawmakers from both parties, who argue that it puts national security at risk. The Senate last month approved, as part of a larger defense bill, a measure that would reinstate tough penalties on the company. It is unclear, however, whether the measure will take effect.