Chinese telecoms equipment group ZTE Corp said on Friday it expected to record a net loss in the first half of the year due to the hefty fine it agreed in order to lift a USA ban on component supplies.
In an agreement struck last month, Washington agreed to lift the export ban if ZTE paid an additional United States dollars 1 billion fine - beyond the USD 892 million penalty imposed in 2017.
The export ban, imposed earlier this year, effectively crippled ZTE by prohibiting USA companies from selling products or services to it. "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".
ZTE did not respond to requests for comment.
U.S. President Donald Trump tweeted in May that he closed down ZTE and let it reopen, although no agreement had been reached.
The department imposed the ban in April over allegations that ZTE violated USA sanctions against Iran and North Korea, but the company's warnings that the penalty would put it out of business prompted the White House to negotiate a reprieve for the firm. ZTE pleaded guilty and settled with Commerce past year over the illegal shipments.
ZTE paid $892 million in penalties to the United States in connection with the 2017 settlement and guilty plea. The news came after markets closed in Asia.
ZTE paid US companies more than $2.3 billion in 2017, including Qualcomm Inc, Intel Corp, Broadcom and Texas Instruments Inc. However, Trump later announced a deal with ZTE in which the Chinese company would pay a $1 billion fine for its trade violations, as well as replace its entire management and board by the middle of July.
The U.S. Senate paved the way for a showdown with Trump over the issue last month, when it passed an annual defense policy bill with an amendment attempting to reverse the deal.
The telecoms equipment giant reported a profit of 2.29 billion yuan for the same period a year ago, it said, and attributed the decline this year, in part, to "the suspension of major operating activities". Its fate is unclear.
"The ZTE settlement represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case", the Commerce Department said. It also broke news of the ban in April.