ZTE gets waiver on supply networks as it awaits ban removal

ZTE Massive MIMO 1+X SSB
Image credit: Alexander Tolstykh | shutterstock.com

(Reuters) – The US Commerce Department on Tuesday granted a temporary reprieve to ZTE that allows China’s No. 2 telecommunications equipment maker to conduct business needed to maintain existing networks and equipment in the United States as it works toward the lifting of a US sales ban.

The authorization from the US Commerce Department’s Bureau of Industry and Services, dated July 2 and which was seen by Reuters, runs until Aug. 1.

ZTE and spokespeople for the US Department of Commerce did not respond to requests for comment.

ZTE, which makes smart phones and networking gear, was forced to cease major operations in April after the United States slapped it with a supplier ban saying it broke an agreement to discipline executives who conspired to evade US sanctions on Iran and North Korea.

The company had also agreed to pay a $1 billion penalty and put $400 million in an escrow account as part of the deal to resume business with US suppliers – which provide almost a third of the components used in ZTE’s equipment.

The escrow agreement is still pending, according to a source. Until it is executed, ZTE cannot deposit the $400 million in escrow necessary to get the ban lifted.

While the denial order is still in place, the authorization grants a waiver to some companies that do business with ZTE to do so for one month, a source told Reuters.

The waivers allow for a limited type of activity but does not authorize any new business.

Last month, a US Commerce Department official told Reuters that ZTE was expected to deposit the $400 million in an escrow account in the “next couple of days,” saying that was the last step before the ban could be lifted.

The uncertainty over the ban amid intensifying US-China trade tensions has hammered ZTE shares, which have cratered 60% since trading resumed last month following a two-month hiatus, wiping out more than $11 billion of the company’s market valuation.

ZTE announced a new board last week in a radical management shakeup as part of a $1.4 billion deal with the United States.

(Reporting by Karen Freifeld and Anirban Paul; writing by Tim Ahmann; editing by Leslie Adler and Marguerita Choy)

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