Commerce Secretary: US reaches deal with China’s ZTE

Telecommunications giant must put $400M in escrow – a sum it would forfeit if it violates agreement

Associated Press

WASHINGTON

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 U.S. regulators monitor its operations.

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

The Commerce Department said ZTE must also put $400 million in escrow – a sum it would forfeit if it violated Thursday’s agreement.

In addition, a compliance team chosen by the United States will be embedded at ZTE, and the Chinese company must change its board and executive team.

President Donald Trump has drawn fire from Congress for intervening in the case to rescue a Chinese company that had violated U.S. sanctions against two rogue nations that have been pursuing nuclear weapons programs.

U.S. Rep. Tim Ryan of Howland, D-13th, said, “Days after President Trump took a sledgehammer to our relationships with Canada and Europe by imposing harmful tariffs – jeopardizing alliances that helped us win the Cold War – his administration has formally announced its golden parachute for Chinese telecom giant ZTE.

“This is a company that repeatedly violated sanctions against Iran and North Korea, and with which the NSA, FBI, and CIA all have cyber security concerns. The Pentagon even stopped selling its phones on military bases,” Ryan said in his statement. “Nevertheless, they continue to get VIP treatment from President Trump and his inner circle while communities like Youngstown and Akron suffer because of the president’s own actions.”

“ZTE is essentially on probation,” said Amanda DeBusk, chairwoman of the international trade and government regulation practice at Dechert LLP and a former Commerce official. “It’s unprecedented to have U.S. agents as monitors. ... It’s certainly a good precedent for this situation. ZTE is a repeat offender.”

In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived U.S. regulators after it settled charges last year of sanctions violations: Instead of disciplining all employees involved, Commerce said, ZTE had paid some of them full bonuses and then lied about it.

The decision amounted to a death sentence to ZTE, which relies on U.S. parts and which announced that it was halting operations. The ban also hurt American companies that supply ZTE.

Trump barged into the ZTE case last month by tweeting that he was working with President Xi Jinping to put ZTE “back in business, fast” and save tens of thousands of Chinese jobs. He later tweeted the ZTE talks were “part of a larger trade deal” being negotiated with China.

The resolution of the ZTE case may clear the way for the U.S. to make progress in its trade talks with China. The two countries have threatened to impose tariffs on up to $200 billion worth of each other’s products in a dispute over China’s tactics to supplant U.S. technological supremacy, including demands that U.S. companies hand over trade secrets in exchange for access to the Chinese market.