Published: Thu, June 07, 2018
Business | By Pearl Harrison

Commerce Secretary: US reaches deal with China's ZTE

Commerce Secretary: US reaches deal with China's ZTE

The Trump administration has agreed to relax its punishment of Chinese telecom company ZTE, Commerce Secretary Wilbur Ross said Thursday.

According to Reuters, "the preliminary deal includes a $1 billion fine against ZTE, plus $400 million in escrow to cover any future violations".

ZTE ceased major operations in April, and a seven-year ban was imposed on the company for breaking a 2017 agreement by illegally shipping goods to Iran and North Korea. However, a Commerce Department spokesman said that "no definitive agreement has been signed by both parties".

Ross called ZTE's actions a "world-class embarrassment", and said that the US deal with ZTE imposes the "most strict" compliance ever on any company. Gogo Wireless was one of the first USA companies to speak publicly about the potential impact of the ZTE ban.

ZTE could not be reached for comment by either Reuters or the Post. The U.S. position has been that the fine is a law enforcement action, which should not be included in the discussions around trade. Since then, the company appears to have signed a preliminary agreement that would see them pay a larger fine and then have the ban lifted. It has enjoyed the backing of Chinese President Xi Jinping, who has been negotiating with Trump over a broader trade agreement.

The ZTE saga is close to an end, as sources with knowledge about the subject claim the Chinese company has already signed a preliminary agreement with the United States government, which supposedly allows it to continue to buy components, parts, hardware and software from the US under certain conditions.

ZTE has promised to replace its board and executive team as part of the deal.

The sources said ZTE also agreed to allow United States representatives to make site visits without coordinating with Chinese government officials, as required by a non-public agreement between the countries. Smaller makers of optical components, including Oclaro and Acacia, rely more heavily on ZTE's business.

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