China's ZTE signed preliminary agreement to lift U.S. ban

Gladys Abbott
June 10, 2018

But under the deal announced Thursday, ZTE will pay an additional $1 billion penalty and put another $400 million in escrow to cover possible future violations. In March 2017, ZTE agreed to pay that fine and also to a seven-year suspended denial of export privileges, which would go into effect if ZTE broke the agreement during that time.

The May ban came after the government determined that ZTE violated terms of its 2017 settlement by failing to fire employees involved with illegally shipping United States equipment to Iran and North Korea. After U.S. regulators announced sanctions against ZTE in April, it wasn't clear the company could even survive. The company shut down manufacturing and other major operations on May 10, idling most of its 75,000-strong workforce. Hopefully this time ZTE respects the wishes of the US government to not sell to banned countries and ultimately this may lead to China and the USA finally coming to a real agreement on the larger on-going trade discussion. Democratic Sen. Chuck Schumer of NY immediately responded to today's announcement: "Despite his tough talk, this deal with ZTE proves the president just shoots blanks". This will allow the United States to claim a total penalty of as much as $1.7 billion.

According to a report from Reuters, ZTE has reached a deal with U.S. authorities that would lift a ban that prevents it from buying parts from usa suppliers.

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

Washington lawmakers were indignant last month after Trump offered to rescue ZTE as a personal favor to Chinese President Xi Jinping - even though the company is widely considered a liability for U.S. national cyber-security. The news isn't exactly surprising, given that President Trump hinted at it on Twitter three weeks ago; However, it's a speedy turnaround for a company that just one month ago was questioning whether it could continue to exist.

"At about 6 a.m. this morning, we executed a definitive agreement with ZTE". Following that agreement, ZTE was found to have paid out bonuses to a number of employees instead of disciplining them as previously agreed.

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However, President Trump chose to step in and help save Chinese jobs and perhaps gain an upper hand in ongoing trade negations with China.

And last week, the Daily Beast reported that a day after the president said he wanted to help ZTE, the tech company hired the Mercury Public Affairs firm to lobby on its behalf in Washington.

As part of a new agreement, the sources said, ZTE will retain another compliance contractor in addition to the three-year court-appointed monitor imposed by the plea agreement.

ZTE supplier Oclaro Inc rose nearly 1 percent while Acacia Communications Inc was down 1.5 percent.

Shares of Acacia and Oclaro extended their gains on Tuesday in heavy trading after news of the preliminary deal, ending up 1.7 percent and 1.8 percent, respectively.

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