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

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The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE Corp.to stay in business in exchange for paying an additional $1 billion in fines and agreeing to let US regulators monitor its operations.

Following the ban on selling USA -made hardware (and potentially software) to ZTE earlier this year, it appears that the company may have reached a compromise with the us government, according to Reuters.

In addition, a compliance team chosen by the United States will be embedded at ZTE and the Chinese company must change its board and executive team. 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. In the event that the company violates the terms of the new agreement, this money will automatically go to the U.S government.

"We still retain the power to shut them down again", Commerce Secretary Wilbur Ross said Thursday in an interview on CNBC. "If they commit any further violations, we would again be able to deny them access to USA technology as well as collect the additional $400 million in escrow". Their function will be to monitor on a real-time basis ZTE's compliance with USA export control laws. Trump has countered that USA companies were also hurt by the ban because they could no longer sell parts to the firm.

ZTE was fined US$1.2 billion in March 2017, but in April, Washington banned the sale of crucial U.S. components to the firm after finding it had lied multiple times and failed to take action against employees responsible for sanctions violations.

U.S. President Donald Trump met with his trade advisers on Tuesday to discuss China's offer to import an extra $70 billion of American goods over a year in hopes of defusing a potential trade war between the world's two largest economies.

ZTE had been crippled by American sanctions, partly because it relies on American-made components to build its phones and cellular equipment.

ZTE's survival has been a topic of discussion in high-level US-China trade talks. Apparently, a part of the reason is that ZTE wants to replace a top executive with one from another company which the USA considers a potential threat, so we'll have to wait and see where things go from here... In a memo to staff, Chairman Yin Yimin said ZTE would look to get back into business as soon as possible, and hold those responsible for the breach accountable, a company source said. The agreement signals that China will be more likely to approve the $43 billion acquisition of NXP by Qualcomm Inc., a deal that has been pending for 18 months.