Commerce Secretary Wilbur Ross said Thursday that the Trump administration has a struck a deal with Chinese telecom giant ZTE. The U.S. responded to this information with a denial order which made it illegal for U.S. companies to do business with ZTE. Apparently, the U.S. is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.
The agreement also forces ZTE to replace its board of directors and executive team and installs a US -chosen compliance team.
In April, the USA accused ZTE of not living up to the terms of the March agreement and banned it from dealing with USA companies for seven years - effectively a death sentence because up to 60% of the components of its mobile phones, for example, are sourced from American firms.
The compliance team will report jointly to the new ZTE chairman and the US Commerce Department. The resolution of the ZTE case may clear the way for the U.S.to make progress in its high-stakes trade talks with China.
The sanctions imposed in April crippled ZTE's production, but U.S. President Donald Trump announced on May 13 that he and Chinese President Xi Jinping were working on a way to get ZTE back into business. ZTE is also being forced to replace its board of directors and senior leadership.
Ross called ZTE's actions a "world-class embarrassment", and said that the USA deal with ZTE imposes the "most strict" compliance ever on any company.
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"We will closely monitor ZTE's behaviour".
The agreement is controversial: ZTE had been sanctioned by the US for doing business with North Korea and Iran.
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 president was seen as going easy on the Chinese company in the midst of trade talks over, among other things, Beijing's strong-arm efforts to appropriate American technology. It was blocked from purchasing parts from US companies, sanctions that had crippled the company.
In April, Washington banned the sale of crucial United States components to the company after finding it had repeatedly lied and failed to take action against workers responsible for the sanctions violations.
This means that the total penalties paid by the Shenzhen-based firm could reach US$2.29bn, after it stumped up an initial US$895m under the terms of a settlement reached in March 2017.