The U.S. strikes a deal with Chinese electronics giant ZTE

The U.S. strikes a deal with Chinese electronics giant ZTE

The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE Corp.to stay in business in exchange for paying an additional $1 billion in fines and agreeing to let US regulators monitor its operations.

China's second-largest telecoms equipment maker was banned from the USA market in April, after the company was caught violating United States sanctions on Iran and North Korea and the terms of a subsequent plea agreement. Reuters reports U.S Commerce Department ban on ZTE is likely to be lifted although " no definitive agreement has been signed by both parties" just yet.

ZTE did not immediately respond to requests for comment.

The fine announced today comes on top of $892 million ZTE has already paid for breaking USA sanctions by selling equipment to North Korea and Iran.

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"If they do violate it again, in addition to the billion dollars they are paying us up front, we had them put $400 million in escrow", he said.

The agreement also forces ZTE to replace its board of directors and executive team and installs a US -chosen compliance team.

The Chinese smartphone and telecom company ZTE will officially be allowed to do business in the US again.

"It's not only that ZTE was busted for evading sanctions on Iran and North Korea, and then lied about it; it's that 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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WILBUR ROSS: It imposes the most strict compliance that we've ever had on any company, American or foreign.

In return, ZTE can once again buy parts for its phones from American companies. This compromise would allow the company to once again use USA -made components in their products-although at a large cost.

President Donald Trump reversed course last month, saying he was working with Chinese President Xi Jinping to keep the firm in business. This settlement is in response to the U.S. Commerce Department's Bureau of Industry and Security (BIS) denial order that was imposed as a result of ZTE violating its March 2017 settlement agreement.

This marks a dramatic change of viewpoint for Secretary Ross, who in April blasted ZTE and levied the original 7-year ban. Further fees could be assessed for a grand total as much as $1.7 billion. ZTE is also being forced to replace its board of directors and senior leadership.

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Whatever the case, as long as ZTE can keep its nose clean and adhere to the terms of this newest deal with the USA government, it will be able to solider on as China's second-largest smartphone OEM. China has vowed to retaliate on everything from US soybeans to airplanes, and said it will abandon its commitments if the USA follows through on its tariff threat.

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