Friday, 08 June 2018 05:37

US announces deal to put ZTE back in business

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The United States has agreed to a deal which will put Chinese telecommunications company ZTE Corporation back in business in the country, with the company agreeing to pay a US$1 billion fine and overhaul its leadership in order to lift a ban on doing business with American suppliers.

According to a statement from the US Department of Commerce on Thursday, ZTE must pay the fine and also place an additional US$400 million in escrow against any future infringements.

These penalties are in addition to the US$892 million already paid to the US to settle charges of not implementing the terms of a settlement for violating sanctions on exports.

In April, ZTE was hit with a seven-year ban on importing components from American companies for breaking US sanctions on exporting goods to North Korea and Iran, and not adhering to the terms of a settlement.

The company, a major player in the global telecommunications equipment business, was fined US$1.19 billion in March 2017 and also agreed to a seven-year suspended export ban which was to take effect if it was found to be in violation of the Export Administration Regulations.

Subsequently, the Commerce Department claimed to have found that statements made by ZTE to the Bureau of Industry and Security were false. As a penalty, US firms were prevented from selling components to ZTE for seven years.

US President Donald Trump later argued for lifting the ban because it affected American suppliers too. In 2017, ZTE paid more than US$2.3 billion to 211 American suppliers.

US Commerce Secretary Wilbur Ross said in a statement: "“Today, BIS (the Commerce Department’s Bureau of Industry and Security) is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures.

“We will closely monitor ZTE’s behaviour. If they commit any further violations, we would again be able to deny them access to US technology as well as collect the additional US$400 million in escrow.

"The first settlement with ZTE set a record for civil and criminal penalties in an export control case. This new settlement agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.”

"The purpose of this settlement is to modify ZTE’s behaviour while setting a new precedent for monitoring to assure compliance with US law. Embedding compliance officers into the company vastly improves the speed with which the Department of Commerce can detect and deal with any violations."

Reuters reported that several US politicians had vowed to introduce legislation in Congress to scuttle the deal.

Republican Senator Marco Rubio said in a tweet, using the hashtag #VeryBadDeal: "I assure you with 100 percent confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe."

And Democrat Senator Mark Warner, the top member from that party on the Intelligence Committee, said: “ZTE is a state-controlled telecommunications company that poses significant espionage risks, which this agreement appears to do little to address."

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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