Business

U.S. reaches new settlement with China's ZTE

U.S. reaches new settlement with China's ZTE

The deal exacts a $1 billion penalty from ZTE for its past sanctions violations, as well as $400 million held in escrow that will be forfeited to the United States should ZTE violate sanctions again.

The penalties are in addition to the $892 million in penalties ZTE already paid to the US government under a March 2017 settlement agreement.

Chinese smartphone maker ZTE has agreed to pay a $1 billion penalty to end crippling American sanctions, the USA government announced on Thursday.

Early reports claimed that ZTE had already signed an agreement with the United States with these terms, but a spokesperson in touch with Politico says that "no definitive agreement has been signed by both parties".

It's official. China's second largest telecom equipment provider, Hong Kong listed ZTE, can now reopen its major operations and source components from America's technology companies.

China-based ZTE has reportedly signed an agreement in principle that would lift a U.S. Commerce Department ban on the company which barred it from buying from U.S. suppliers. Furthermore the company will have to completely clean house on its executive team and board of directors, replacing all of the members in both of those groups.

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He also warned that if the company is caught not complying to the letter of the new agreement, strict punishment will snap into place.

After President Trump reached a deal with China's president Xi Jinping, the Department of Commerce now seems willing to remove that ban against ZTE.

Ross, speaking about the agreement on CNBC today, said he did not think the arrangement would have any effect on tariff talks with China. Following that agreement, ZTE was found to have paid out bonuses to a number of employees instead of disciplining them as previously agreed. For this "pattern of deception, false statements, and repeated violations", the US Commerce Department issued the ban in April. For other US companies, ZTE is a supplier. Their function will be to monitor on a real-time basis ZTE's compliance with US export control laws.

Although the company dismissed four senior officials for their part in the scandal and installed a compliance team and new procedures at a cost of more than $50 million, it did not discipline a further 35 staff involved - a failure which prompted the USA government's action. Today, commerce secretary Wilbur Ross told CNBC that the USA struck a deal with ZTE to return it to business. Qualcomm and Intel count ZTE as a customer, as do smaller component makers Oclaro and Acacia, both of which saw their stock prices drop sharply when the ZTE export ban was announced.

The company was fined $1.2 billion previous year.