Chinese smartphone maker ZTE has taken one of the final steps needed to escape the severe sanctions that brought the company to brink of collapse, the US Commerce Department said Wednesday.

ZTE signed an agreement to put $400 million in escrow to cover any future penalties for US sanctions violations, according to the statement.

As a favor to Chinese President Xi Jinping, US President Donald Trump ordered Commerce to ease the penalties on ZTE, imposed after officials concluded the company repeatedly lied and failed to address violations of US sanctions on North Korea.

Commerce had banned US companies from supplying ZTE with crucial components, forcing the company to halt operations.

But in an agreement struck last month, Washington agreed to lift the export ban if ZTE paid an additional $1 billion fine, replaced its board of directors, retained outside monitors and put $400 million in escrow to cover future penalties.

Irate US lawmakers have moved to reinstate the ban, accusing Trump rewarding a company which has repeatedly broken US law and engaged in espionage.

But with the escrow agreement signed, the ban will be lifted once the money is transferred, the Commerce Department said, defending the reprieve granted to the Chinese giant.

"The ZTE settlement represents the toughest penalty and strictest compliance regime the Department has ever imposed in such a case," the statement said.

"It will deter future bad actors and ensure the Department is able to protect the United States from those that would do us harm."

dg/hs

ZTE

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