US ZTE ban will remain in place until the company pays $1bn fine and places $400m in escrow

ZTE deal a 'personal favour' from President Trump - but it will definitely be shut down if it contravenes new agreement

ZTE, the Chinese networking equipment maker sanctioned in April by US authorities, remains under embargo today despite striking a new deal with the US Department of Commerce.

That had followed a surprise announcement by US Secretary of State for Commerce, Wilbur Ross, on Thursday last week that the US Commerce Department had reached an agreement with ZTE.

However, the embargo will remain in place until ZTE pays the new $1bn fine and places $400m in escrow with a bank of the US government's choosing. It will also need to replace its board of directors, any executives above senior vice president level, according to Reuters, and any executives tied to previous ‘wrongdoing' - all within 30 days.

A board of auditors acceptable to the US government also needs to be established to ensure ZTE's compliance with the new deal, as well as with US sanctions.

The president did this as a personal favour to the president of China as a way of showing some goodwill for bigger efforts, such as the one here in Singapore

After that, ZTE will need to negotiate new trade credit terms with suppliers and might have to pay upfront for the components it needs to restart production of smartphones and networking hardware.

The deal, according to White House trade advisor Peter Navarro was a personal favour from President Trump to China's President Xi, appearing on Fox News over the weekend.

However, Navarro added that ZTE would definitely be shut down were it to contravene any element of the new deal. "It's going to be three strikes you're out on ZTE. If they do one more additional thing, they will be shut down," Navarro told Fox News.

He continued: "We have a bad actor in ZTE. The president did this as a personal favour to the president of China as a way of showing some goodwill for bigger efforts, such as the one here in Singapore. But it will be three strikes you're out for ZTE. And everybody understands that within this administration.

"We're going to have monitors inside that company. They're changing their board of directors. They're changing their management. The they're paying us a billion and a half dollars in order to continue in business."

ZTE was hit with a complete sales embargo by US authorities in April after it was found to have contravened the terms of a 2017 agreement agreed with the US Department of Commerce over the breaking of sanctions against Iran and North Korea.

The US imposed a formal embargo forbidding US companies from doing business with ZTE with immediate effect, cutting the supply of critical components for the company's smartphones and networking equipment. ZTE was forced to suspend operations within a month and to warn that it could be shut down entirely.

In response, US President Donald Trump promised to help ZTE "get back into business", while in return China's president is believed to have helped facilitate Trump's summit with North Korean leader Kim Jong-un over the weekend.