US Reaches $1 Billion Deal With ZTE

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Apparently, the USA is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.

The fines agreed to on Thursday are in addition to $892 million in penalties which ZTE has already paid to the US government under the previous settlement.

The crippling ban was put in place after Washington said ZTE violated a 2017 deal in which the Chinese company admitted to evading sanctions on Iran and North Korea.

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". After U.S. regulators announced sanctions against ZTE in April, it wasn't clear the company could even survive. The U.S.is maintaining its 10-year export ban on ZTE, but the ban is indefinitely suspended and is likely to remain suspended if ZTE complies with the U.S. trade laws.

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Still, the resolution of the ZTE case may clear the way for the USA to make progress in its trade talks with China. The Democratic senator Chuck Schumer of NY immediately responded to Thursday's announcement: "Despite his tough talk, this deal with ZTE proves the president just shoots blanks". ZTE was assessed US$2.29 billion in civil and criminal penalties by the Commerce Department and other United States agencies since previous year.

Reuters reports that "ZTE promised to replace its board and executive team in 30 days". "ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation", said Secretary Ross at the time. Under the terms of its guilty plea, ZTE paid $890 million in fines, and agreed to fire some senior staff, and strip bonuses from 35 others.

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. Their function will be to monitor on a real-time basis ZTE's compliance with USA export control laws.

ZTE, which employs around 75,000 people worldwide, buys key components from a range of United States companies, including chips from Qualcomm and Intel.

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DWYER: Today's deal came less than two months after the original seven-year ban was announced and less than one month after President Trump tweeted that he wanted to help ZTE survive.

Wilbur Ross unveiled details of the deal in an interview for USA television channel CNBC on Thursday, saying that ZTE had agreed to pay out $1.4 billion (€1.18 billion) in return for the lifting of a ban that prevented it buying vital U.S. components. The move will allow the company to get back into the business. Post calculations of U.S. parts in the company's products would also have to be on a public website.

The announcement boosted shares in USA component makers including Acacia Communications, Oclaro and Lumentum Holdings.

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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