ZTE to pay $1B penalty in deal with US Commerce Department

Image Credit REUTERS  Carlo Allegri

An agreement in principle is not a final agreement but is a step toward it. Commerce Department spokesman James Rockas told Reuters that "no definitive agreement has been signed by both parties".

USA lawmakers on Thursday renewed vocal objections to lifting the sanctions, saying the company posed an "espionage risk" to the United States in addition to having violated its sanctions on Iran and North Korea.

A month ago, we reported that ZTE was on life support and had chose to mostly pause operations after being given a hefty ban from the U.S. government over lies it told as a part of a previous agreement stemming from related illegal shipments of products to Iran.

The Chinese smartphone and telecom company ZTE will officially be allowed to do business in the USA again. He said the Commerce Department is fining the Chinese telecommunications company US$1.4 billion, including US$400 million in escrow, on top of a US$1 billion USA penalty a year ago.

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

Over the weekend, ZTE signed the agreement in principle drawn up by the United States, but the amended settlement agreement has not yet been signed, sources said. The Pentagon earlier this month ordered retail outlets on USA military bases to remove from the shelves smartphones made by the two companies.

On Thursday, he defended the new deal on CNBC, though, saying that "it imposes the most strict compliance that we've ever had on any company, American or foreign" and is meant to deter future wrongdoing.

US Commerce Secretary Wilbur Ross, who announced the deal, reiterated a denial that there was any connection between the two.

Over recent weeks, the Trump administration has held talks with officials in Beijing to save the telecom company.

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There are also some political ramifications to this deal - which are outside the scope of AnandTech's purview - but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the USA and China.

"Today, [the Bureau of Industry and Security] is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures".

Washington's agreement Thursday to restore ZTE's access to US components removed a prominent irritant in relations with Beijing, but the two nations still are embroiled in a broader conflict over trade, tariffs and technology policy. Although not specifically stated, the announcement implies that ZTE will no longer be banned from selling technology to other countries and that American companies will no longer be banned from selling components to ZTE, either.

If you'll recall, last month ZTE was handed an export ban as the result of not following the terms of a court case years ago.

Trump has drawn criticism from members of Congress for going easy on the Chinese company.

ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. ZTE is also being forced to replace its board of directors and senior leadership.

The probe found that ZTE bought USA components and incorporated them into its equipment, illegally shipped them to Iran, and devised elaborate schemes to hide the illegal activity.

The suppliers include Qualcomm, Broadcom and Intel, as well as smaller optical component makers Acacia Communications and Oclaro.

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