The U.S. Commerce Department lifted a ban on Chinese smartphone maker ZTE on Friday after it paid a $1.4 billion penalty levied by the U.S. government.
The ban was imposed in April after Commerce Department officials said ZTE made false statements about disciplining 35 employees after it pleaded guilty previous year to violating USA sanctions by illegally shipping US goods and technology to Iran, the Commerce Department said. Because ZTE relies on USA suppliers to make its smartphones.
Shen Meng, director of boutique investment bank Chanson & Co, said the overwhelming response from the stock market reflects the optimism that ZTE is on the way back to business. 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 USA national security. 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.
The sanctions influenced ZTE's decision recently to cease operations, and eliminate its entire board and appoint a new chairman. The latest $1.4 billion deal comes on top of that. Last month, the Senate voted unanimously to reinstate the ban on the company citing national security concerns. Many U.S. lawmakers see the company as a national security threat.
The U.S. Senate paved the way for a showdown with Trump over the issue last month, when it passed an annual defense policy bill with an amendment attempting to reverse the deal.
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"ZTE must resume its business as soon as possible, given that the final sprint toward the commercialization of fifth-generation mobile communication technology kicked off in the middle of June".
Reuters reported on US demands for a deal on June 1, and on June 5, revealed that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms.
Shares of ZTE in Shenzhen also surged by the maximum daily 10 percent following the announcement of the news.
The export ban, imposed earlier this year, effectively crippled ZTE by prohibiting USA companies from selling products or services to it.