Published: Sun, June 10, 2018
Money | By Ethel Goodwin

China's ZTE Reportedly Strikes Preliminary Deal To Lift U.S. Ban

China's ZTE Reportedly Strikes Preliminary Deal To Lift U.S. Ban

Apparently, the USA is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.

The settlement in March 2017 was reached after ZTE was found to have violated a USA trade embargo by engaging in a multi-year conspiracy to use equipment that originated in the United States for telecommunications networks in Iran.

In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived US regulators after it settled charges last year of sanctions violations: Instead of disciplining all employees involved, Commerce said, ZTE had paid some of them full bonuses and then lied about it.

Ross also referenced the potential impact on US companies that supply parts to ZTE.

In addition, for the next 10 years the company will have to hire a compliance team, selected by United States authorities, to monitor its business on a "real-time basis". The Chinese authorities' involvement, on the backdrop of ongoing trade negotiations with the US, have saved ZTE from almost-certain death. Sixty percent of the components used in ZTE's flagship Axon M phone are from U.S. suppliers. "They will pay for those people, but the people will report to the new chairman, because we are also having them replace the entire management and the entire board".

ZTE ceased major operations earlier this year because of the ban.

The US government has reached a deal with ZTE that will ease crippling sanctions on the Chinese smartphone company.

According to a Commerce Department filing from April, ZTE never reprimanded its 35 lower-level employees, and worse, it made false statements to the Department about its compliance.

Ross, speaking about the agreement on CNBC today, said he did not think the arrangement would have any effect on tariff talks with China. "When it comes to China, despite his tough talk, this deal with ZTE proves the president just shoots blanks".

"We still retain the power to shut them down again", he said Thursday in an interview on CNBC.

It had been speculated that any deal could be scuppered by resistance from both Democrats and Republicans in US Congress, who believe Trump is bowing to pressure and that ZTE could be a possible threat to national security. The move was a direct result of ZTE selling to Iran and North Korea in direct violation of an April 2017 agreement that had ZTE promise to not sell to the aforementioned countries.

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