Friday, 19 October, 2018

US reaches deal with China's ZTE that includes $1 billion fine

ZTE has been banned from purchasing sensitive technology from the US over its illegal sales to Iran and North Korea Report Tentative ZTE Deal with U.S. Could Bring Fine to $1.7B AFP 5 Jun 2018Washington DC
Lindsey Cook | 08 June, 2018, 10:44

ZTE will have to pay a $1B penalty plus put $400M in escrow to cover future violations and embed a US-picked compliance team.

It also requires ZTE to change its board of directors and executive team in 30 days.

The Trump administration has agreed to relax its punishment of Chinese telecom company ZTE, Commerce Secretary Wilbur Ross said Thursday.

USA companies could soon be cleared to do business with China's ZTE, according to Reuters.

Not all was rosy - U.S. lawmakers threatened legal action against the ZTE deal, saying the telecoms firm posed an "espionage risk" to the United States in addition to having violated its sanctions on Iran and North Korea.

The ban amounted to a death sentence for the company, which relies on USA parts. Both companies' share prices rose Thursday, with NXP up more than 6 percent in midday trading.

US chipmaker Qualcomm has been trying to buy NXP Semiconductors of the Netherlands, but given the company's global reach, the deal had to be approved by numerous countries' antitrust regulators, including China's.

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Derek Scissors, a resident scholar at the American Enterprise Institute, a Washington think tank, said that even if compliance officers were allowed into ZTE, they wouldn't prevent China from violating sanctions.

Several US lawmakers have warned against easing sanctions on ZTE, citing national security concerns. "This "deal" with #ZTE may keep them from selling to Iran and North Korea". So the United States went nuclear on ZTE, imposing a seven-year ban on USA companies selling technology to the Chinese firm. "It's unprecedented to have US agents as monitors ..."

The fine comes after Donald Trump stepped in to save the company after USA regulators barred it from doing business in the U.S., an effective death blow for the company. As a result, ZTE was banned from using USA -made components for 7 years starting from April 2017.

In April, Washington banned the sale of crucial United States components to the company after finding it had repeatedly lied and failed to take action against workers responsible for the sanctions violations. The White House didn't respond to a request for comment. Marco Rubio (R-Florida) on Thursday.

"By letting ZTE off the hook, the president who roared like a lion is governing like a lamb when it comes to China", Chuck Schumer, the US Senate Democratic leader, said in a statement.

US President Donald Trump met with his trade advisers on Tuesday to discuss China's offer to import an extra $70 billion of American goods over a year in hopes of defusing a potential trade war between the world's two largest economies. NeoPhotonics (NPTN) rose 1.6% to 7.15, while Oclaro (OCLR) climbed 1.4% to 9.18.

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