Published: Sun, June 10, 2018
Economy | By Shawn Conner

Chinese phone maker ZTE saved from brink after deal with U.S.

Chinese phone maker ZTE saved from brink after deal with U.S.

The U.S. blocked ZTE's access to U.S. suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. Should ZTE fail to comply with the deal, in addition to the billion dollar penalty, the agreement also includes $400 million in escrow to cover any future violations, including "sanctions or anything else", according to Ross.

ZTE will also provide access to a team for a period of 10 years to monitor the company's compliance with US export control laws.

Trump intervened in the ZTE case last month, tweeting that he was working with Chinese President Xi Jinping to put ZTE "back in business, fast" and save tens of thousands of Chinese jobs.

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However, last month, Trump tweeted that "too many jobs in China" were being lost because of the USA action and that he had instructed the Commerce Department to find a solution.

In April, the commerce department barred ZTE from importing American components for seven years, having concluded that it deceived United States regulators after it settled charges last year of sanctions violations. No American company is allowed to export products to those on this list, meaning ZTE was cut off from US component suppliers. But skeptics anxious that ZTE's destruction could mar an already delicate relationship between the USA and China. The U.S.is maintaining its 10-year export ban on ZTE, but the ban is indefinitely suspended and is likely to remain suspended if ZTE complies with the U.S. trade laws. 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.

Commerce Secretary Wilbur Ross told CNBC on Thursday the deal was tough and would keep ZTE on a short leash.

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

ZTE did not immediately respond to requests for comment. Senate minority leader Chuck Schumer (D-NY) has said publicly that "Both parties in Congress should come together to stop this deal in its tracks".

Reuters reported earlier this week that the two sides were close to reaching a deal that would allow ZTE to resume business as usual. Last year, the company was already fined $1.2 billion for violating USA sanctions.

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