ZTE and U.S. still working on escrow agreement: U.S. official

(Reuters) - ZTE Corp and the U.S. government are still working on an escrow agreement that must be completed and funded with $400 million before a ban on the Chinese company can be lifted, a U.S. official told Reuters on Tuesday.

FILE PHOTO: A ZTE smart phone is pictured in this illustration taken April 17, 2018. REUTERS/Carlo Allegri/Illustration/File Photo

The Commerce Department official, who declined to be identified, emphasized that working out the escrow agreement was part of a “normal process.”

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 escrow account is designed to allow the United States to obtain the money in case ZTE violates the settlement. An escrow agreement would define the terms by which the company deposits the money and the conditions under which it could be released.

ZTE paid the $1 billion civil penalty last week, according to people familiar with the matter.

Spokespeople for ZTE did not immediately respond to requests for comment.

ZTE, China’s second-largest telecommunications equipment maker, said last month 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.

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.

Shenzhen-based ZTE has a subsidiary in Richardson, Texas.

Reporting by Karen Freifeld; Editing by Meredith Mazzilli