Commerce Secretary: US reaches deal with China's ZTE

Muriel Colon
June 11, 2018

The agreement requires ZTE to pay almost $1 billion Dollars, as well as keep $400 million of penalty in escrow, or in custody of a third party, before the Commerce Department's Bureau of Industry and Security (BIS) will remove the company off of its Denied Persons List. He later tweeted the ZTE talks were "part of a larger trade deal" being negotiated with China.

In addition, Ross said that a compliance team chosen by the United States will be embedded at ZTE and that the Chinese company must change its board and executive team within 30 days.

U.S. Commerce Secretary Wilbur Ross said on Thursday the government has reached a deal with ZTE Corp that reverses a ban on its buying parts from U.S. suppliers, allowing China's No. 2 telecommunications equipment maker to get back into business.

ZTE pleaded guilty a year ago to conspiring to evade US embargoes by buying USA components, incorporating them into ZTE equipment and illegally shipping them to Iran, paying almost $900 million in fines.

Neither the Commerce Department, the White House nor ZTE immediately responded to requests for comment.

Chinese tech giant ZTE Corp.'s chairman promised no further compliance violations and apologized to customers in a letter Friday for disruptions caused by its violation of US export controls, a newspaper reported. Their function will be to monitor on a real-time basis ZTE's compliance with USA export control laws. The ban also hurt American companies that supply ZTE.

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.

ZTE's survival has been a topic of discussion in high-level U.S. The agreement signals that China will be more likely to approve the $43 billion acquisition of NXP by Qualcomm Inc., a deal that has been pending for 18 months. The team will monitor ZTE's adherence to USA export control laws - an arrangement the department described as the most stringent requirements it has ever imposed.

"We executed a definitive agreement with ZTE", Ross told CNBC Thursday. Qualcomm rose 2 per cent.

It wasn't exactly a blazing fast process, costing ZTE billions as the Chinese multinational telecommunications equipment and systems company essentially had to shut down operations for the better part of two months, but you can probably expect phones like the Android Go-powered Tempo Go to be back in stock soon enough.

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