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ZTE agrees to 'strictest' US Commerce settlement

10 June, 2018, 03:19 | Author: Samuel Sharp
  • China's ZTE said it ceased major operations last month due to the ban

Amidst the white-hot trade tension brewing between the worlds two most powerful superpowers, U.S. President Donald Trump surprisingly announced his intention to help the beleaguered Chinese company which we covered here last month. Apparently, the U.S. is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.

For those unaware, Shenzhen-based ZTE violated sanctions placed on both Iran and North Korea by the U.S. A Commerce Department spokesman said that "no definitive agreement has been signed by both parties".

USA companies provide an estimated 25 to 30 per cent of components in ZTE's equipment, which includes smartphones and gear to build telecommunications networks. Commerce Secretary Wilbur Ross said today that ZTE has agreed to pay the largest penalty ever levied by the department's Bureau of Industry and Security (BIS), and that the company will "adopt unprecedented compliance measures". The U.S.is maintaining its 10-year export ban on ZTE, but the ban is indefinitely suspended and is likely to remain suspended if ZTE complies with the U.S. trade laws.

The commerce secretary said he did not think the settlement of the ZTE dispute would have any impact on ongoing contentious trade and tariff talks between the US and China, the world's two biggest economies.


Under the terms of the settlement, ZTE is paying an immediate $1B fine, on top of the existing $892M in fines they've already paid related to their misconduct in this case. This brings the total penalties against ZTE to $2.29 billion, including the $400 million which will be placed in escrow. 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. One of China's largest telecommunications companies is back on its feet today, thanks to a deal with the USA government. For the United States to shut down one of China's largest companies is a very dramatic type of move. It agreed to pay $890 million in fines, dismiss four employees, and discipline 35 others by either denying them their bonuses or reprimanding them. The two countries have threatened to impose tariffs on up to $200 billion worth of each other's products in a dispute over China's tactics to supplant US technological supremacy, including demands that USA companies hand over trade secrets in exchange for access to the Chinese market.

The compliance team will report jointly to the new ZTE chairman and the US Commerce Department.

"ZTE made false statements to the US Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation", Ross said in April, when his department reactivated the sanctions. Chinese telecom firms like ZTE and Huawei are suspected of having ties to the Chinese military, and their products already are banned on many U.S. military bases.

In an interview with CNBC, Ross expressed his satisfaction with the arrangement, which imposes a fine of one billion dollars to this giant of the sector and forces it to leave in trust 400 additional millions.

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