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US will lift the crippling sanctions on China’s ZTE and fine it $1B
The U.S. is set to lift the crippling sanctions it has placed on ZTE Corp. as part of a newly struck deal that will include a $1 billion penalty against the Chinese electronics company and sweeping leadership changes.
“At about 6 a.m. this morning, we executed a definitive agreement with ZTE,” Commerce Secretary Wilbur Ross revealed in an interview on CNBC today. “And that brings to a conclusion this phase of the development with them.”
The deal is the culmination of closely watched negotiations between the Trump administration and ZTE over the broad export restrictions that have been imposed on the company. In April, the Department of Commerce barred American businesses from selling technology components to ZTE after it found that the Shenzhen-based firm had skirted U.S. sanctions against North Korea and Iran.
The move dealt a massive, and instantaneous, blow to the Chinese firm’s supply chain. American companies have been accounting for an estimated 25 to 30 percent of the components ZTE uses in its product portfolio, which consists mainly of telecommunications equipment and mobile devices. Last month, the company announced that it had ceased “major operating activities” due to the export ban.
The newly announced agreement will save ZTE from what would have otherwise been a bleak fate. Under the terms of the deal, the company is set to pay a $1 billion fine and place $400 million more in escrow. The latter sum will be forfeited should ZTE again run afoul of U.S. regulations.
On top of these financial penalties, the deal also has major organizational consequences for the firm. In his CNBC appearance, Ross said the U.S. will require ZTE to change its senior management and board of directors in 30 days. Moreover, American regulators will appoint a compliance team to oversee the company’s activities.
“This is a pretty strict settlement,” Ross said. “The strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”
Image: Kārlis Dambrāns/Flickr
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