ZTE to pay $1B penalty in deal with US Commerce Department

ZTE signs preliminary agreement to lift US ban

ZTE will reportedly pay over $1 billion to lift US ban

Commerce Secretary Wilbur Ross says that the Trump administration has reached a "definitive agreement" with Chinese telecom giant ZTE that Ross claims "imposes the most strict compliance that we've ever had on any company, American or foreign".

The deal which ZTE has agreed to would see the company pay a $1 billion fine, with $400 million in escrow should the company break the terms of agreement again.

Today the US Department of Commerce has come to an agreement with the company, which will pay a $1 billion fine for violating sanctions.

Back in April, the United States government announced a complete and total ban of any U.S. components manufacturers from selling to Chinese telecom and handset giant, ZTE (HKG:0763). The company shut down manufacturing and other major operations on May 10, idling most of its 75,000-strong workforce.

The commerce secretary said he did not think the settlement of the ZTE dispute would have any impact on ongoing contentious trade and tariff talks between the US and China, the world's two biggest economies. 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".

Over the weekend, ZTE signed the agreement drawn up by the United States, the sources said, but the amended settlement has not been signed.

ZTE has promised to replace its board and executive team as part of the deal. Ross added that if the company violates the new agreement, it could also be put under denial of export privileges again, too.

ZTE has pledged to fire four senior employees and discipline 35 others as a result of the guilty verdict it received in a Texas court where one of its subsidiaries are based.

"We will closely monitor ZTE's behavior", said Ross in the release.

The terms, they said, were in line with Reuters reporting on the USA demands Friday. The company already has a U.S. court-appointed monitor. The US agency and the Chinese company signed off on "all 23 pages" of the agreement, he said. In a memo to staff, Chairman Yin Yimin said ZTE would look to get back into business as soon as possible, and hold those responsible for the breach accountable, a company source said. Earlier this month, Trump announced he wanted to help ZTE, as part of negotiating a trade deal with China.

The suppliers include Qualcomm, Broadcom, and Intel Corp, as well as smaller optical component makers Acacia Communications Incand Oclaro. This means that they could be fined up to $1.7 billion in total.

Latest News