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

Eileen GuzmanJun 10, 2018

Since the decision came into force last month, President Donald Trump has appeared to open the door on a compromise after announcing on Twitter that he would help the group "get back into business". The team will monitor ZTE's adherence to us export control laws - an arrangement the department described as the most stringent requirements it has ever imposed. "If they commit any further violations, we would again be able to deny them access to USA technology as well as collect the additional $400 million in escrow". Sources say the preliminary deal includes a $1 billion fine against the Chinese company and an additional $400 million in escrow in the event of future violations.

The compliance team will report jointly to the new ZTE chairman and the US Commerce Department.

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

The decision amounted to a death sentence to ZTE, which relies on USA parts and which announced that it was halting operations.

The probe found that ZTE had conspired to evade US embargoes by buying USA components, incorporating them into ZTE equipment and illegally shipping them to Iran.

The Department of Commerce will also change its 2017 settlement agreement with ZTE, counting the $361 million it has already paid in penalties toward the sum, Reuters reported. It will be made up of "individuals who are fluent in Chinese, because this is going to affect the total company, not just the American part of the company", said Ross. The deal will allow the company to restart operations after it pays a $1 billion fine and installs USA compliance officers to monitor its activity. Hopefully this time ZTE respects the wishes of the US government to not sell to banned countries and ultimately this may lead to China and the USA finally coming to a real agreement on the larger on-going trade discussion. Instead, ZTE seems to have given bonuses to those same executives.Because of this, the Department of Commerce ordered the denial of export privileges against ZTE, which also meant that American companies would no longer be able to sell equipment to ZTE.

"If the U.S. is truly going to make an example out of ZTE, the name itself is now toxic and can not be used going forward", Earl Lum, the President of EJL Wireless Research, a consultancy and research firm based in the USA, said when the ban came into force. The company already has a USA court-appointed monitor.

ZTE ceased major operations earlier this year because of the ban. It has a small but rising share of the smartphone business in the US.

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