US Reaches Deal With China's ZTE - Secretary of Commerce

Randal Sanchez
June 10, 2018

Ross told CNBC the accord will force ZTE, which employs almost 75,000 workers, to pay a $1 billion fine for violating the USA ban on trade with North Korea and Iran, put another $400 million in escrow, and within 30 days replace its entire management and board.

That report said ZTE would have to pay a total of $1.7 billion in penalties, with a preliminary deal including a $1 billion fine and $400 million in escrow in case of future violations.

ZTE will also provide access to a team for a period of 10 years to monitor the company's compliance with USA export control laws.

The Trump administration has agreed to relax its punishment of Chinese telecom company ZTE, Commerce Secretary Wilbur Ross said Thursday.

The company settled criminal and civil charges a year ago in connection with violating USA sanctions against Iran and North Korea.

In return, the Commerce Department will lift the denial order banning ZTE from buying American products, which has crippled the company. The decision to embed a USA -appointed compliance team is potentially more stringent than the management purge Trump initially floated. But Reuters reports that ZTE and the U.S. government have signed a preliminary agreement that will lift the Denial Order.

ZTE must also replace its existing board of director, management senior leadership roles within 30 days, who will be selected by the BIS. That ban's removal is said to have saved the Chinese government-owned ZTE from collapse.

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The company will pay a $1 billion fine and agree to establish and pay for an in-house compliance team staffed by US experts, Ross told CNBC.

The Commerce Department said the compliance team will be in place for a decade.

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". 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.

"We will closely monitor ZTE's behaviour".

ZTE did not immediately respond to requests for comment. Besides having to pay a huge fine, ZTE must also allow unrestricted visits meant to verify that United States components are being used as claimed by the company.

However, President Trump chose to step in and help save Chinese jobs and perhaps gain an upper hand in ongoing trade negations with China.

The agreement follows growing criticism within the Republican party of the president's handling of trade negotiations with China and attempts by some in Congress to rein in his authority to impose tariffs on the EU, Canada and other allies in the name of national security.

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