US, China Reach Deal to End Sanctions on Telecom Giant ZTE

Jun 10, 2018, 03:18
US, China Reach Deal to End Sanctions on Telecom Giant ZTE

The US slapped sanctions on Chinese government-controlled in ZTE in April for selling goods to North Korea and Iran.

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

US companies provide an estimated 25 to 30 per cent of components in ZTE's equipment, which includes smartphones and gear to build telecommunications networks.

The US government launched an investigation into ZTE after Reuters reported in 2012 the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known US technology companies.

In case you haven't been following along, ZTE previously agreed to certain conditions back in March 2017 after they were found to have ignored US sanctions and shipped products to both North Korea and Iran.

ZTE did not respond to repeated requests for comment. ZTE was assessed US$2.29 billion in civil and criminal penalties by the Commerce Department and other United States agencies since previous year. "ZTE has also been replacing some of its top executives in a bid to make good on its pledge".

Lawmakers including Senate Minority Leader Chuck Schumer have accused Trump of dangling a ZTE reprieve as a way to convince Beijing to offer concessions that would allow the president to call off punitive tariffs on Chinese imports set to take effect next week.

"We executed a definitive agreement with ZTE", Ross told CNBC Thursday.

In return, the USA will be suspending - but not removing - the U.S. technology export ban that has caused the company to grind to a halt to begin with. Under the terms of its guilty plea, ZTE paid $890 million in fines, and agreed to fire some senior staff, and strip bonuses from 35 others.

One week after announcing it had ceased major operations as a result of the ban, President Trump tweeted that he was working with Chinese president Xi Jinping to find a way for ZTE to "get back into business, fast". He said the penalties should serve as a very strong deterrent for "other potential bad actors" to force compliance with US trade restrictions.

Commerce Secretary Wilbur Ross told CNBC this morning that the USA has struck a deal to lift sanctions on the electronics giant.

In addition to the more than $1.8 billion in combined fines, ZTE will be required to retain a team of specially assigned compliance coordinators answerable to BIS for a period of 10 years.

ZTE supplier Oclaro Inc rose nearly 1 percent while Acacia Communications Inc was down 1.5 percent.

Update: As of June 7th, ZTE and the United States government have officially reached a deal which will enable the Chinese manufacturer to stay in business. Of those, $1 billion is the fine and $400 million will be in escrow in case of future transgressions.