US Deal Allows China’s ZTE To Resume Business

The US has reached a deal with China’s ZTE to allow the telecommunications equipment maker to go back into business, reversing a ban on buying parts from US suppliers, the US Commerce Department has said.

According to US Commerce Secretary Wilbur Ross, the deal will see ZTE pay a $1 billion (£750m) fine and place another $400m in escrow, to be forfeited if further breaches of US sanctions occur. The company is also to change its board and management within 30 days.

The deal, a draft of which was disclosed last month, requires ZTE to retain a US-appointed compliance team for 10 years, in addition to its US  court-appointed monitor.

The ban can be reactivated if more violations are found, Ross said.

Trade row

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

ZTE, China’s No. 2 telecommunications equipment firm after Huawei, is heavily dependent upon US parts and was forced to partly cease operations in April after the US imposed a seven-year ban.

The move came after ZTE was found breaking a 2017 agreement reached after it was caught shipping goods to Iran and North Korea in contravention of US sanctions.

Ross said the fine is the largest the Commerce Department has levied to date. US government departments have assessed $2.29bn in civil and criminal penalties against ZTE since last year.

The deal comes amidst tense trade talks between the US and China, with ZTE’s reinstatement a top priority for Chinese negotiators.

National security threat?

Chipmaker Qualcomm had been caught in the crossfire, as the provider of most of the processors in ZTE’s smartphones. Qualcomm is also awaiting Chinese approval for its pending $44bn acquisition of NXP Semiconductors.

ZTE has long been targeted by US intelligence authorities as a potential threat to national security, and critics in the Republican party said the deal had done nothing to lessen this threat.

“It will do nothing to keep us safe from corporate and national security espionage,” said senator Marco Rubio on Twitter.

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