China’s ZTE will pay $1B fine in deal with US

Image Credit REUTERS  Carlo Allegri

The fine comes on top of the roughly $1 billion ZTE has already paid for selling equipment to North Korea and Iran in violation of USA sanctions.

"The sources requested anonymity because they were not authorized to publicly discuss the matter".

ZTE has reportedly reached an agreement in principle with the Trump administration to lift the Department of Commerce's ban on American companies selling equipment to the Chinese telecommunications giant.

The Commerce Department stated that ZTE had been put on the list for "falsely informing the U.S. Government that it would or had disciplined numerous employees responsible for the violations that led to" a previous agreement in March 2017, for the violation of USA trade agreements.

The Commerce Department action came after President Trump tweeted earlier this month that he planned to help ZTE because "too many jobs in China" would otherwise be lost.

Washington lawmakers were indignant last month after Trump offered to rescue ZTE as a personal favor to Chinese President Xi Jinping - even though the company is widely considered a liability for USA national cyber-security.

ZTE has been persona non grata in the U.S. for some time now, with the Trump administration having slapped a Denial Order on the company preventing it from operating in North America.

Ross, speaking about the agreement on CNBC today, said he did not think the arrangement would have any effect on tariff talks with China.

Back in April, the United States government announced a complete and total ban of any U.S. components manufacturers from selling to Chinese telecom and handset giant, ZTE (HKG:0763).

Amid mounting trade tension between the United States and China, lawmakers have grown increasingly critical of the national security threat from telecom companies such as ZTE and Huawei. Shenzhen-based ZTE has a subsidiary in Richardson, Texas.

But the company admitted that while it had fired the four senior employees, it had made false statements about the others, the officials said. The ban also hurt American companies that supply ZTE.

The deal will involve ZTE paying a $1bn penalty and hiring a compliance team chosen by the US. "ZTE misled the Department of Commerce". The company was allowed continued access to the USA market under the 2017 agreement.

Under the deal, ZTE must retain a compliance team selected by the Commerce Department for 10 years.

Update: As of June 7th, ZTE and the U.S. government have officially reached a deal which will enable the Chinese manufacturer to stay in business.

Last year, ZTE paid over $2.3 billion to United States suppliers, a senior ZTE official told Reuters last month.

The announcement boosted shares in USA component makers including Acacia Communications, Oclaro and Lumentum Holdings. This means that they could be fined up to $1.7 billion in total.