Published: Thu, June 07, 2018
Economy | By Shawn Conner

ZTE Said to Have Signed Preliminary Agreement to Lift US Ban

ZTE Said to Have Signed Preliminary Agreement to Lift US Ban

WASHINGTON-The U.S. and China have reached a deal that will allow telecommunications company ZTE Corp.to continue to do business, requiring it to pay a $1 billion fine and place U.S. enforcement officers in the company to monitor its actions, Commerce Secretary Wilbur Ross said Thursday.

The tentative deal we have learned about today via Reuters, calls out a $1billion fine for the original breach of the April 2017 agreement to not sell to North Korea and Iran plus an additional $400 million in escrow to cover any future violations.

The Commerce Department plans to amend the agreement to count part of ZTE's previous fine from a year ago ($360 million) as part of the total penalties.

In total, the US will collect $1.7 billion from the Chinese phone company for violating sanctions against Iran and North Korea.

Mr. Ross said the compliance team would be staffed by Chinese-speaking US agents and would report to ZTE's new management as well as the Commerce Department.

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Ross also said that a compliance team picked by the US will be embedded at ZTE and that the Chinese company must change its board and executive team in 30 days. ZTE, the fourth-largest smartphone maker in the USA by market share, "buys a big percentage of individual parts from U.S. companies". ZTE declined to comment.

At the weekend, the company is believed to have agreed to the plan although a "settlement" document has yet to be signed.

It's looking more and more like ZTE will be saved, thanks to a new agreement between the China-based smartphone maker and the US government.

The ZTE saga is close to an end, as sources with knowledge about the subject claim the Chinese company has already signed a preliminary agreement with the United States government, which supposedly allows it to continue to buy components, parts, hardware and software from the USA under certain conditions.

As part of the deal, sources said, ZTE promised to replace its board and executive team in 30 days. At that time, the USA discovered documents that showed how ZTE established new entities to sell US technologies to Iran.

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Last month, President Trump ordered the Commerce Department to reconsider the company's punishment after what he said was a personal request from President Xi Jinping of China.

Those measures had threatened to put ZTE out of business.

United States companies provide an estimated 25 to 30 percent of components in ZTE's equipment, which includes smartphones and gear to build telecommunications networks.

Also as part of the deal, the company must allow audits of their sites so that it can be seen US components are being used as claimed.

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