ZTE Signs Preliminary Agreement With Commerce Department To Lift US Ban

Gladys Abbott
June 7, 2018

The U.S. has reached a deal with Chinese telecom giant ZTE, but the company will have to pay up and make some major business changes, according to Commerce Secretary Wilbur Ross.

Reuters says that the deal will include ZTE paying a $1 billion fine for violating U.S. sanctions, as well as putting additional funds in escrow in case of any future violations.

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.

Finally, while no agreement has been officially inked, the sources in the Reuters article did say ZTE has finished all of its signatures and that the USA just needs to finalize the deal.

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ZTE shut down its operations at the beginning of May following Commerce's decision to ban it from purchasing equipment from us companies. The agreement is also expected to call for other concessions from ZTE, including new board members and increased USA oversight of its business.

ZTE has become a critical part of the broader discussions between China and the United States, the two largest economies in the world, over trade tensions and whether the two countries can prevent a trade war that could involve billions of dollars' worth of tariffs. It has enjoyed the backing of Chinese President Xi Jinping, who has been negotiating with Trump over a broader trade agreement. It also has to replace its board of directors and top-level executives within 30 days of signing the agreement.

A man walks past a building with the ZTE logos in Beijing. Last month, Trump tweeted that he was looking for a way for ZTE to "get back into business, fast" because there were "too many jobs in China lost" from ZTE's shutdown. "Congress should move in a bipartisan fashion to block this deal right away". The company relies on USA -made components for many of its products, and also sells many of those products to US customers.

USA companies provide an estimated 25 to 30 percent of components in ZTE's equipment, which includes smartphones and gear to build telecommunications networks.

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