Skip to main content

US lifts trade ban on ZTE in controversial deal with Chinese phone maker

US lifts trade ban on ZTE in controversial deal with Chinese phone maker


Senators hate it

Share this story

Photo by James Bareham / The Verge

The United States has lifted its trade ban on ZTE, allowing the Chinese telecom to once again obtain critical parts and software from American companies, after three months of being unable to do so. The trade ban all but shut down ZTE after it went into place in April since the company was no longer able to acquire products like Qualcomm processors or Android software from the US.

In an announcement that appears designed to address security concerns around ZTE, Commerce Secretary Wilbur Ross said the department would “remain vigilant” in monitoring ZTE’s actions. “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,” Ross said in a statement.

ZTE’s road to recovery was an unlikely one: despite constant lamentations of Chinese trade practices, President Trump took up ZTE’s cause, saying too many jobs in China would be lost, and instructed the Commerce Department to work out a deal that would lift the ban. Trump later added that ZTE buys parts from US companies and said the deal was “also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.”

Trump wanted to save ZTE; Senate Republicans didn’t

The US enacted the trade ban in response to ZTE violating sanctions on Iran and North Korea. The company then failed to follow through with a series of fairly basic punishments — like not giving bonuses to the people who violated trade sanctions — and repeatedly lied to the US government, according to the Commerce Department. This led the department to conclude that ZTE is “incapable of being, or unwilling to be, a reliable and trustworthy recipient of US-origin goods, software, and technology.”

But after Trump’s instructions, the Commerce Department went back and cut a new deal with ZTE that would lift the trade ban so long as ZTE replaced its board, paid a $1 billion fine, and put another $400 million in escrow should it err again. ZTE must also retain a compliance team, chosen by and answering to the US, for a decade, which will monitor the company’s actions. The department said the deal enacted the most “stringent compliance measures” it had ever issued. It also threatens a 10-year ban, should ZTE not meet the new terms.

The deal was controversial. Several Republicans came out in opposition, expressing distrust of ZTE and concern that it could pose national security threats, since its telecommunications equipment is being used across the US. The Senate even passed an amendment to a bill that would kill the deal, but the House didn’t, and nothing has come of the vote since.

ZTE has now changed its board, paid the fine, and put the money in escrow. In early July, the Commerce Department began lifting portions of the ban so that ZTE could resume basic activities like issuing security updates. Now, the company should be able to get fully up and running again.