China's ZTE signed preliminary agreement to lift U.S. ban

Roman Schwartz
June 7, 2018

Following the ban on selling USA -made hardware (and potentially software) to ZTE earlier this year, it appears that the company may have reached a compromise with the us government, according to Reuters. Sources say the preliminary deal includes a $1 billion fine against the Chinese company and an additional $400 million in escrow in the event of future violations. That settlement also reportedly doesn't include the $361 million ZTE already paid to the Commerce Department.

ZTE plead guilty to conspiring to violate United States sanctions against Iran and North Korea in a U.S. court previous year. Commerce Department spokesman James Rockas told Reuters on Tuesday that "no definitive agreement has been signed by both parties". Hopefully this time ZTE respects the wishes of the USA government to not sell to banned countries and ultimately this may lead to China and the US finally coming to a real agreement on the larger on-going trade discussion.

ZTE also did not immediately respond to requests for comment. The agreement is also expected to call for other concessions from ZTE, including new board members and increased US oversight of its business. This means that they could be fined up to $1.7 billion in total.

The U.S.is in the midst of trade talks with China to avoid a tariff dispute from escalating into a full-blown trade war.

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"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.

The Commerce Department denial order prevented ZTE from utilizing key technology from U.S. suppliers like Qualcomm and and Broadcom, making it hard to produce smartphones or telecommunications equipment. There has been strong opposition to breathing new life into ZTE from the US Congress, which has labeled the company a threat to "national security". "Congress should move in a bipartisan fashion to block this deal right away". At that time, the US discovered documents that showed how ZTE established new entities to sell USA technologies to Iran.

As part of a new agreement, the sources said, ZTE will retain another compliance contractor in addition to the three-year court-appointed monitor imposed by the plea agreement.

Earlier, the Post reported that an Indonesian property development firm with ties to Trump was given $500 million in Chinese government loans around the time of the sudden policy change on ZTE, leading some to suggest a possible quid pro quo.

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