Back in April, the United States banned American firms from selling parts and software to China’s ZTE Corp for seven years, which could have disastrous consequences for the telecoms equipment maker and serve to fuel tensions between the world’s two largest economies.
On Tuesday, Reuters reported that ZTE Corp. and the U.S. government are working on an escrow agreement, which would need to be completed and funded with $400 million before a ban on China’s second largest telecommunications equipment maker can be lifted.
The Commerce Department official declined to be identified, but told Reuters that working out the escrow agreement was part of a “normal process.” According to Reuters:
‘ZTE agreed to pay a $1 billion penalty and put the $400 million in an escrow account in a U.S. bank as part of a settlement agreement reached on June 7 to allow it to once again do business with U.S. suppliers.’
The purpose of the escrow account is to allow the United States to obtain the money in case ZTE violates the settlement. Reuters reported:
‘An escrow agreement would define the terms by which the company deposits the money and the conditions under which it could be released.’
Last week, ZTE paid the $1 million civil penalty, and ZTE said last month that it had ceased major operations “after the Commerce Department issued an order banning U.S. companies from supplying goods for ZTE’s smart phones and networking gear.”
According to Reuters:
‘The Commerce Department ordered the ban after finding that ZTE made false statements about disciplining 35 employees involved in illegally shipping U.S. goods to Iran and a cover-up that led to a March 2017 deal.
‘ZTE last year paid $892 million in civil and criminal penalties and pleaded guilty in a Texas federal court in connection with the illegal activity.’
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