The US blocked ZTE's access to US 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. 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.
As part of the deal, ZTE must also allow unfettered site visits to verify that US components are being used as claimed by the company, post calculations of the USA components in its products on a public website, and replace its board and executive team in 30 days, sources said.
The sanctions imposed in April crippled ZTE's production, but U.S. President Donald Trump announced on May 13 that he and Chinese President Xi Jinping were working on a way to get ZTE back into business.
ZTE past year settled criminal and civil charges in connection with its violation of US sanctions on Iran and North Korea. The order effectively cut off the company off from receiving most United States technology, and as a result of this ban, ZTE's operations, which heavily relied on importing both hardware and software from the U.S., ground to a halt, putting the future of the company in doubt. They must also post calculations of the usage of USA -made components on a public website.
The US has made a decision to lift the tech ban on Chinese telecom giant ZTE in return for a US$1.4bn settlement and several other compliance measures. As a result, the Commerce Department enacted a seven-year sanction on ZTE, which was part of the initial guilty plea but suspended, pursuant to ZTE carrying out the other steps it promised.
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"This is a pretty strict settlement, the strictest and largest fine that has ever been brought by the Commerce Department against any violator of export controls", Ross said on CNBC.
ZTE also agreed to change its executive team and board within 30 days.
ZTE did not respond to repeated requests for comment. Now ZTE has got to pay a $1 billion fine and submit to USA oversight. Secretary of Commerce Wilbur Ross said in a press release, "We will closely monitor ZTE's behavior".
This move was slammed by members of Congress from both parties, who said the President's tweet was irresponsible. One of China's largest telecommunications companies is back on its feet today, thanks to a deal with the US government.
In response to the announced deal, Senate Minority Leader Chuck Schumer said Thursday in a statement, "When it comes to China, despite [Trump's] tough talk, this deal with ZTE proves the president just shoots blanks".