As a result of EAR (Export Administration Regulations) non-compliance issues, ZTE was banned from purchasing American parts. After 3 months the US Commerce Department has lifted the ban at the urging of US President Donald Trump, removing sanctions that had crippled the Chinese telecommunications giant who is the countries second largest telecommunications equipment producer.
However having the ban lifted was a costly exercise. The ban was removed after ZTE paid the final tranche of a $US1.4 billion penalty by placing $US400 million in escrow at a US bank, according to an emailed statement by the Department. That sum comes in addition to the $US892 million in penalties the telecommunications equipment maker has paid to the US government after pleading guilty to violating sanctions.
In addition to the fines, the company is said to be facing at least $US3 billion in total losses due to supply being stopped of chips and other components needed to make its networking gear and smartphones.
Initially ZTE was given a seven year ban after selling American technology to Iran and North Korea. Such a lengthy ban forced ZTR to announce it was shutting down, however President Donald Trump reconsidered the penalties as a personal favour to Chinese President Xi Jinping, with his administration later announcing it would allow the company to stay in business after paying a new fine, changing its management and providing “high-level security guarantees”.
ZTE’s new management has vowed to uphold compliance as a top priority as it faces the challenge of rebuilding trust with phone companies and corporate customers.
In his announcement on 13th July, Commerce Secretary Wilbur Ross promised that the company would continue to face scrutiny by US authorities. “While we lifted the ban on ZTE, the department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all US laws and regulations,” Ross said.
While ZTE is happy to be back in business, not everyone in the US Congress is happy that the sanctions have been lifted and are seeking to have the ban restored, either in part or whole.