Commerce Secretary: US Has Reached Agreement With China's ZTE

Anna Jefferson
June 10, 2018

The fine announced today comes on top of $892 million ZTE has already paid for breaking USA sanctions by selling equipment to North Korea and Iran.

He noted that if the company does violate it again, in addition to the billion dollars they are paying the USA up front, it would have "to put $400 million into escrow".

Ross said the USA will install its "own compliance people" to monitor the company and shareholders will bring in new management and board.

ZTE previous year settled criminal and civil charges in connection with its violation of USA sanctions on Iran and North Korea.

But ZTE warned that the decision amounted to a death sentence on its business, which relies on US parts, and it announced that it was halting operations. ZTE will have to welcome a team of "special compliance coordinators" for a period of 10 years to ensure that it is adhering to the terms of the new agreement. That was a potential death blow to ZTE, which relies on US technology for an estimated 25 to 30 percent of its components.

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According to Reuters, ZTE has signed a preliminary agreement that will lift the ban on usa companies providing ZTE with goods.

Trump tweeted last month that he told Commerce officials to find a way for ZTE to resume operations, later suggesting penalties of a $1.3 billion fine and changes to its board and top management. The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal.

In this file photo taken on June 2, 2018, Commerce Secretary Wilbur Ross leaves a hotel in Beijing.

Ross said the USA will install its "own compliance people" to monitor the company, and shareholders will bring in new management and board.

Noting that the deal imposed the strictest compliance ever on any company, American or foreign, Ross added: "We are literally embedding a compliance department of our choosing into the company".

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Ross touted the deal as a victory, saying the administration's previous strict actions accomplished its goal in that it "brought ... a $17 billion company to its knees more or less put them out of business" and that the new agreement is "something I think even more effective".

ZTE also wanted to be more present in the American smartphone market, but the April shutdown had complicated that plan.

Reviving ZTE has been a personal focus for President Trump, whose government is in the middle of broader trade negotiations with the Chinese government.

Under the agreement, ZTE will pay the United States government a $1.4 billion penalty and replace the company's leadership with a new team. The U.S. responded to this information with a denial order which made it illegal for U.S. companies to do business with ZTE.

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