ZTE agrees to pay $1 billion fine to stop US Denial Order

Image Credit REUTERS  Carlo Allegri

Image Credit REUTERS Carlo Allegri

Commerce Secretary Wilbur Ross said Thursday that the Trump administration has a struck a deal with Chinese telecom giant ZTE.

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 USA national cyber-security. On Tuesday, Commerce Department spokesman James Rockas confirmed that "no definitive agreement [had] been signed by both parties". Sources say the preliminary deal includes a $1 billion fine against the Chinese company and an additional $400 million in escrow in the event of future violations.

The US Department of Commerce will take into account the $361 million paid by the company past year, which will allow the US to claim a $1.7 billion fine. ZTE was assessed $2.29 billion in civil and criminal penalties by the Commerce Department and other US agencies since a year ago.

The decision amounted to a death sentence to ZTE, which relies on US parts and which announced that it was halting operations. ZTE will have to welcome a team of "special compliance coordinators" for a period of 10 years to ensure that it is adhering to the terms of the new agreement.

Some officials involved with the negotiations have said they were unrelated to the ongoing trade talks between the US and China, but others have suggested that ZTE was a bargaining chip for the USA and that China could make other concessions now that ZTE has won a reprieve.

President Donald Trump has drawn criticism from members of Congress for trying to reach a deal to save ZTE and the jobs it provides to Chinese workers.

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President Donald Trump has drawn fire from Congress for intervening in the case to rescue a Chinese company that had violated USA sanctions against two rogue nations that have been pursuing nuclear weapons programs. They will simply monitor the compliance of the company with the US export control laws.

For the last month, Chinese smartphone giant ZTE has been largely shut down after the Trump administration banned USA firms from selling it technology.

The new agreement also requires ZTE to replace its board of directors and senior leadership. The Pentagon earlier this month ordered retail outlets on USA military bases to remove from the shelves smartphones made by the two companies.

Ross said on Sunday he had been having frank, useful talks in China about exports, as Washington presses its message to Beijing about structural economic changes amid the festering trade dispute.

Those strictures, which banned ZTE from buying components from Qualcomm, Corning and Google, effectively shut the smartphone maker down last month.

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