ZTE Signs Agreement to Deposit Escrow With Commerce to End ZTE Ban

July 12, 2018 |Cybersecurity

ZTE signed an agreement with the Department of Commerce that will mean the department's seven-year ban on U.S. companies selling telecom software and equipment to the Chinese company can end as soon as ZTE deposits $400 million in escrow to cover future violations of U.S. sanctions, the agency said Wednesday. The payment was in a deal last month to impose alternative conditions to replace the ban, which Commerce's Bureau of Industry and Security originally announced in April (see 1804170018). Commerce will suspend the ban during a 10-year “probationary period” in exchange for the company's agreement to pay $1.4 billion and other concessions. BIS can reactivate the ban if ZTE again violates sanctions during its probation. “Once the monitor is selected and brought on board, the three-pronged compliance regime ... will be in place,” the department said in a statement. “The ZTE settlement represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case.” Commerce's advancement of the deal came as Congress begins reconciling the House and Senate-passed versions of the FY 2019 National Defense Authorization Act (HR-5515), which contain differing anti-ZTE provisions (see 1806190051). Senate Minority Leader Chuck Schumer, D-N.Y., and Intelligence Committee Vice Chairman Mark Warner, D-Va., criticized moving forward with the deal. It's “a direct betrayal of President [Donald] Trump’s promise to be tough on China and protect American workers,” Schumer said: Trump "gave away the store to China for nothing, so now it’s entirely up to Congress to right the administration’s wrong. I hope my Republican colleagues in the House and Senate will do the right thing and maintain the Senate’s strong language in [HR-5515] that reverses the administration’s awful ZTE deal.” Warner called it a “sweetheart deal” that “not only ignores these serious issues, it lets ZTE off the hook for evading sanctions against Iran and North Korea with a slap on the wrist.”