ZTE to reopen after $1 billion fine, new leadership

08 June 2018, 06:49 | Andres Norman

EnlargeSpencer Platt Getty Images

EnlargeSpencer Platt  Getty Images

Under the deal, the Chinese giant will also have to change its entire board of directors and retain outside legal compliance specialists who will report to the Commerce Department for 10 years. Instead, ZTE seems to have given bonuses to those same executives.Because of this, the Department of Commerce ordered the denial of export privileges against ZTE, which also meant that American companies would no longer be able to sell equipment to ZTE.

There are also some political ramifications to this deal - which are outside the scope of AnandTech's purview - but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the United States and China.

The US had previously blocked ZTE's access to US suppliers, saying the company had violated a sanctions settlement.

Reuters reported exclusively on Tuesday that ZTE had signed a preliminary agreement with the Commerce Department, along with the fine and other terms.

ZTE's dispute with the U.S. government stems from allegations that the Chinese company sold technology to North Korea and Iran in defiance of USA sanctions. But why is the USA government so concerned with what ZTE makes and sells? The deal will allow the company to restart operations after it pays a $1 billion fine and installs USA compliance officers to monitor its activity. The U.S. position has been that the fine is a law enforcement action, which should not be included in the discussions around trade.

The trouble with ZTE goes back to past year when the company admitted to selling US technology to Iran and North Korea in violation of economic sanctions.

According to a report from Reuters, ZTE has reached a deal with usa authorities that would lift a ban that prevents it from buying parts from U.S. suppliers. Moreover, the U.S. Commerce Department is expected to count the $361 million ZTE paid a year ago as part of a settlement agreement, which will allow the government to claim no less than $1.7 billion in penalties.

In total, the USA will collect $1.7 billion from the Chinese phone company for violating sanctions against Iran and North Korea.

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Sen. Marco Rubio bashed a deal the Trump administration struck Thursday with China's ZTE, calling it "very bad" and that it "will do nothing to keep up safe from corporate & national security espionage".

ZTE did not immediately respond to requests for comment. Chinese telecom firms like ZTE and Huawei are suspected of having ties to the Chinese military, and their products already are banned on many United States military bases.

Shares in NXP Semiconductors NV rose 3.8 per cent in early trading in NY after news of the ZTE deal was announced.

The terms, they said, were in line with Reuters reporting on the usa demands Friday.

The Chinese Commerce Ministry said Thursday that some progress was made in talks that ended last weekend.

Shares of Qualcomm Inc rose as much as 4.7 percent while NXP jumped as much as 6.7 percent.

Both Republicans and Democrats criticized Trump's willingness to make a deal on ZTE. NeoPhotonics (NPTN) rose 1.6% to 7.15, while Oclaro (OCLR) climbed 1.4% to 9.18.



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