Published: Sun, June 10, 2018
Finance | By Loren Pratt

ZTE signs preliminary agreement to lift United States ban

ZTE signs preliminary agreement to lift United States ban

Today a U.S. Commerce Department spokesman said that an agreement is pending between the United States and ZTE that would see ZTE pay a hefty fine and in exchange be allowed to purchase crucial components again.

As part of the agreement, ZTE has promised to replace its current board of directors and executive team within thirty days and will allow the company periodic inspections to verify that the locally manufactured components are being used as agreed.

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 telecommunications equipment maker has been on life support since a seven-year USA ban was imposed in April, breaking a 2017 agreement reached after it was caught illegally shipping goods to Iran and North Korea.

U.S. Secretary of Commerce Wilbur Ross confirmed to CNBC that the U.S. government has reached an agreement with ZTE to lift the crippling supply ban imposed on April 16. It also requires a US-chosen team of compliance experts to be embedded into the company, who will report directly to the next chairman. That was a potential death blow to ZTE, which relies on USA technology for an estimated 25 to 30 percent of its components.

The US had blocked ZTE's access to American suppliers, saying it had violated a sanctions settlement. Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period.

According to a Commerce Department filing from April, ZTE never reprimanded its 35 lower-level employees, and worse, it made false statements to the Department about its compliance.

ZTE did not immediately respond to requests for comment.

"The Chinese are well aware there's a new marshal in town", Ross said.

"We are literally embedding a compliance department of our choosing into the company to monitor it going forward", said Ross on CNBC.

Many in Congress, both Republicans and Democrats have strongly opposed how the president was handling the ZTE matter - and blasted the latest twist.

"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".

The problems with ZTE extend beyond its violations of sanctions.

The Commerce Department action came after President Trump tweeted earlier this month that he planned to help ZTE because "too many jobs in China" would otherwise be lost.

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