US lifts ZTE supplier ban, sending shares soaring

ZTE website

Chinese telecoms hardware manufacturer ZTE has had something of a rough ride in the US recently, but having agreed to comply with all of the demands made by authorities, the ban on its US operations has been lifted.

The US had banned American companies from supplying goods to ZTE, effectively crippling its business. Now, having paid $400 million into an escrow account -- on top of its $1 billion fine last month -- the company is operating again, and its Hong Kong-listed shares jumped 12 percent as a result. But the lifting of the ban is far from being the end of this saga for ZTE


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In all, ZTE has now paid more than $2 billion to the US following a settlement that was reached back in 2017. But Secretary of Commerce Wilbur Ross warns that while the supplier ban has been lifted, ZTE can expected to be very closely monitored from now on.

Secretary Ross said:

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. Three interlocking elements -- a suspended denial order, the $400 million in escrow, and a compliance team selected by and answerable to the Department -- will allow the Department to protect US national security.

New of the lifting of the ban has clearly pleased investors, but ZTE has some way to go before its shares regain the value lost during this period of turbulence. In all, the company's market value dropped $11 billion in response to US sanctions.

In a statement about the matter, the Commerce Department outlined the details of the arrangement with ZTE:

ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to the Department's Bureau of Industry and Security (BIS) for a period of 10 years. Their function will be to monitor on a real-time basis ZTE's compliance with US export control laws. This is the first time BIS has achieved such stringent compliance measures in any case.  The new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period. Finally, ZTE also has replaced the entire board of directors and senior leadership for both entities.

The purpose of this settlement is to modify ZTE's behavior while setting a new precedent for monitoring to assure compliance with US law. The unprecedented access afforded the compliance team by this agreement vastly improves the speed with which the Department of Commerce can detect and deal with any violations.

Image credit: Jarretera / Shutterstock

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