ZTE Signs Preliminary Agreement With Commerce Department To Lift US Ban

Adjust Comment Print

In addition to the fine, a compliance team chosen by the U.S. will be embedded at ZTE and the Chinese company must change its board and executive team.

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.

Under President Donald Trump 's administration, ZTE's status as a Chinese multinational has also put it in the fray of a larger trade dispute between the us and China.

China's second-largest telecoms equipment maker was banned from the USA market in April, after the company was caught violating United States sanctions on Iran and North Korea and the terms of a subsequent plea agreement. Trump has countered that US companies were also hurt by the ban because they could no longer sell parts to the firm.

The compliance team will be in place for 10 years and monitor "on a real-time basis" ZTE's compliance with USA export control laws, the Commerce Department said in a release announcing the settlement. The dominance of USA semiconductor tech in Chinese phones has actually led to great angst in Beijing, and reveals that American firms are ahead in semiconductor and other technologies.

In return, ZTE can once again buy parts for its phones from American companies. ZTE will pay a $1 billion fine, change its board and management, and put $400 in escrow. The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal.

"At about 6:00 A.M. this morning, we executed a definitive agreement with ZTE and that brings, that brings to a conclusion this phase of the developing with them", Ross said in an interview with CNBC.

More news: Trump attacks European Union and Canada on trade ahead of G7 summit
More news: A one time shot, Trump says of summit with N Korea
More news: Trump says he wouldn't mind replacing NAFTA with 2 deals

Back in April, as punishment for continued violations of a previous export ban settlement with the US, the US Department of Commerce's Bureau of Industry and Security enacted a denial order against ZTE. The move will allow the company to get back into the business.

"ZTE is essentially on probation", said Amanda DeBusk, chair of the worldwide trade and government regulation practice at Dechert LLP and a former commerce official.

ZTE could not be reached for comment by either Reuters or the Post.

However, President Trump made a decision to step in and help save Chinese jobs and perhaps gain an upper hand in ongoing trade negations with China. Since then, the company appears to have signed a preliminary agreement that would see them pay a larger fine and then have the ban lifted.

It had been speculated that any deal could be scuppered by resistance from both Democrats and Republicans in US Congress, who believe Trump is bowing to pressure and that ZTE could be a possible threat to national security. The latest sanction in April was because ZTE lied about disciplining some executives responsible for the original violations.

After having been found to have sold equipment to sanctioned countries such as Iran and North Korea, ZTE was previously fined $1.19 billion.

Comments