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

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

ZTE also agreed to place US$400 million in escrow, money which the USA government can take if the Chinese company is found to be in violation again.

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

The US Department of Commerce has finally come to an agreement with the Chinese telecom company ZTE (HKSE:0763).

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

The deal includes a $1 billion penalty against ZTE and a compliance team, chosen by the U.S., will be embedded at the company, Commerce Secretary Wilbur Ross told CNBC Thursday morning.

ZTE ceased major operations earlier this year because of the ban.

Negotiations over ZTE had been linked to wider trade talks between the United States and China.

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. ZTE was assessed US$2.29 billion in civil and criminal penalties by the Commerce Department and other U.S. agencies since a year ago.

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As part of this deal, ZTE will also have to replace its board within 30 days as well as accepting "unfettered site visits" from the USA to ensure that components are being used for their claimed objective.

ZTE will also be required to replace its management board within 30 days. "They will pay for those people, but the people will report to the new chairman", Ross said. Last month, Trump tweeted that he was looking for a way for ZTE to "get back into business, fast" because there were "too many jobs in China lost" from ZTE's shutdown.

ZTE had agreed to dismiss four senior employees and discipline 35 others either by reducing their bonuses or reprimanding them, according to senior Commerce Department officials.

"At about 6 a.m. this morning, we executed a definitive agreement with ZTE". The company will also have to keep a team of "compliance coordinators" for the next 10 years, which will be selected by the DoC.

Commerce Secretary Wilbur Ross told CNBC this morning that the USA has struck a deal to lift sanctions on the electronics giant. The company has also agreed to a decade of inspections to ensure compliance with USA export control laws. At the same time, it continued to ask the USA government to lift the ban.

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.

The suppliers include Qualcomm, Broadcom, and Intel Corp, as well as smaller optical component makers Acacia Communications Incand Oclaro.


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