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China’s ZTE Is Working Again in the U.S. Just as Lawmakers Push for Heavier Sanctions on the Telecom Giant

July 4, 2018, 8:45 AM UTC

The Chinese telecommunications giant ZTE has been given temporary permission to resume some of its business activities in the U.S., according to a Bloomberg report.

ZTE (ZTCOY) was earlier this year hit with a seven-year ban for breaking a settlement with U.S. authorities over ZTE’s illegal sales of telecoms network equipment—using American parts—to Iran. The ban, which stopped ZTE from using American components, meant the company had to shut down its major operations.

But then the Trump administration started showing more leniency to ZTE, in the context of wider trade negotiations with the Chinese. This was a politically controversial move in the U.S., but the company has been scrambling to comply with its new deal by making management changes, paying fines and reportedly clawing back bonuses from employees (current and former) who were responsible for the original sanctions-busting.

According to the new Bloomberg report, the Commerce Department is allowing ZTE to “support existing networks or equipment under contracts signed” before the ban was implemented, until the start of August. At that point, ZTE is “expected to be in compliance with U.S. demands.”

Meanwhile, U.S. lawmakers are still concerned about ZTE posing a threat to national security, and they want to pass new legislation that would restore heavier penalties against the company. And as for the wider trade talks with China, those aren’t going anywhere—the U.S. will on Friday almost certainly hit China with tariffs on $34 billion worth of imports, and this will most likely spark retaliation from Beijing.

The report of ZTE’s authorization, which led to a surge in the company’s stock price, came out just after the White House blocked China Mobile, the world’s largest cellular provider, from linking its systems to U.S. telecoms networks, on national security grounds.