US temporarily lifts ban on ZTE while lawmakers’ debate on its punishment continues

The Chinese telecoms giant is allowed to resume doing business with its American suppliers until August 1

PUBLISHED : Wednesday, 04 July, 2018, 5:00am
UPDATED : Wednesday, 04 July, 2018, 12:22pm

The Trump administration has temporarily lifted part of a ban it had placed on ZTE Corp, allowing the Chinese telecommunications giant resume some of its business activities while the Congress continues to weigh penalties on the company.

The release by the US Commerce Department’s Bureau of Industry and Security takes effect immediately and runs through the end of the month. Under the temporary authorisation, ZTE is allowed to resume receiving shipments from its American suppliers, according to a BIS announcement published on its website on Tuesday.

ZTE may have received a reprieve in US, but China Mobile is next target

The authorisation allows ZTE to resume transactions with its US suppliers for its networks and equipment businesses as well as necessary transactions to provide services to its phones, including software updates and patches, according to the BIS announcement.

Since April, when the department issued its sanctions against ZTE for violating US trade law by selling products to Iran and North Korea, ZTE had been prohibited from buying electronics components from its American suppliers.

The move led to the company to shutter major operations.

US House backs a defence budget that bans ZTE and Huawei sales to Pentagon

The department’s Tuesday announcement came after the Senate and the House of Representatives both passed amendments in their defence appropriations bills that aimed to rein in ZTE on national security concerns.

While it’s unclear what Congress and the Trump administration will agree as a permanent resolution concerning ZTE, the temporary authorisation provides a much-needed lifeline for the company to stay viable and offers some relief to the industry, which has been in a turmoil since the ZTE sanctions were issued.

ZTE’s stock rose to its 10 per cent daily limit in Shenzhen Stock Exchange on Tuesday, the biggest jump in more than a year. Its shares in Hong Kong rose 7.6 per cent.

The Commerce Department originally banned ZTE from procuring American components on April 15. But in May, US President Donald Trump posted on Twitter that “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost.”

Donald Trump not breaking election promise by aiding ZTE, White House says

The department revised its punishment of ZTE, dropping the ban and substituting fines and penalties of US$1.4 billion and a demand that the company replace its management.

Republican and Democratic lawmakers in Congress have pushed back on the softer stance Trump took against ZTE, with several senators seeking the maintenance of the sales ban.

US senators negotiate with Trump on ZTE

Congress is planning to come up with an final agreement on how to penalise the company after Trump urged the lawmakers to not to threaten his deal that salvaged ZTE as part of his broader negotiations strategy against China.

In the interim, ZTE has paid the US$1 billion fine and is setting up US$400 million in escrow to cover potential future violations.