U.S. Strikes Deal to Help China's ZTE, Commerce Secretary Says

10 June, 2018, 11:19 | Author: Kathy Ellis
  • The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

According to the Commerce Department, ZTE will be required to pay a $1 billion fine, is replacing its management, and will submit to oversight from the U.S. Commerce Department in order to be relieved of the crippling punishments that had been slapped on the company for its previous evasion of sanctions placed on North Korea and Iran.

The deal includes a $1 billion penalty against ZTE and a US-chosen compliance department to be embedded into the company.

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.

The Trump administration yesterday announced a deal to allow the telecommunications company to resume buying from US companies, eliminating a key sticking point for the two nations in their talks on trade.

In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived USA regulators after it settled charges last year of sanctions violations: Instead of disciplining all employees involved, Commerce said, ZTE had paid some of them full bonuses and then lied about it. No American company is allowed to export products to those on this list, meaning ZTE was cut off from US component suppliers.

Under the deal, ZTE must retain a compliance team selected by the Commerce Department for 10 years. The U.S. position has been that the fine is a law enforcement action, which should not be included in the discussions around trade. But Reuters reports that ZTE and the United States government have signed a preliminary agreement that will lift the Denial Order. The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal.

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The Department of Commerce notes this is the largest penalty it has ever levied on a single company.

US Commerce Secretary Wilbur Ross, who is now in Beijing for trade talks with China and told CNBC that a deal worth $1.4 billion had been struck.

ZTE did not respond to repeated requests for comment. "This should serve as a very good deterrent not only for them but for other potential bad actors", Ross said.

There are also some political ramifications to this deal - which are outside the scope of AnandTech's purview - but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the U.S. and China. This compromise would allow the company to once again use US -made components in their products-although at a large cost. The president's extraordinary intervention in an enforcement matter drew widespread criticism on Capitol Hill from members of both parties.

The story began last March when ZTE lied to the US government about disciplining employees responsible for supplying, building, and operating telecommunications networks in Iran with USA -supplied components and equipment.

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