The U.S. strikes a deal with Chinese electronics giant ZTE

Roman Schwartz
June 10, 2018

Commerce Secretary Wilbur Ross said Thursday that the Trump administration has a struck a deal with Chinese telecom giant ZTE. When U.S. regulators found that the company had not complied with the terms of the agreement, they cut off ZTE from its U.S. parts suppliers, a move described as a "death sentence" by the company, which employs 70,000 people in China.

Last month, President Trump ordered the Commerce Department to reconsider the company's punishment after what he said was a personal request from President Xi Jinping of China.

Washington lawmakers were indignant last month after Trump offered to rescue ZTE as a personal favor to Chinese President Xi Jinping - even though the company is widely considered a liability for United States national cyber-security.

ZTE's resuscitation with U.S. help has met strong resistance in Congress, where both Democrats and Trump's fellow Republicans have accused him of bowing to pressure from Beijing to help a company that has been labelled a threat to United States national security. "They will pay for those people, but the people will report to the new chairman", Ross told CNBC.

Regardless of those talks, the Trump administration is facing a deeply hostile reaction from Congress, where there is bipartisan opposition to the deal.

In April, the US Commerce Department blocked American firms from selling parts or providing services to ZTE, which also makes telecommunications equipment.

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"This is a company that repeatedly violated sanctions against Iran and North Korea, and with which the NSA, FBI, and Central Intelligence Agency all have cyber security concerns". Shenzhen-based ZTE has a subsidiary in Richardson, Texas. Following that agreement, ZTE was found to have paid out bonuses to a number of employees instead of disciplining them as previously agreed. The government will suspend the 10-year ban but it can activate the ban if there are any violations.

ZTE had been crippled by American sanctions, partly because it relies on American-made components to build its phones and cellular equipment. "It is the strictest and largest fine that has ever been brought by the Commerce Department". The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal.

In addition, for the next 10 years the company will have to hire a compliance team, selected by U.S. authorities, to monitor its business on a "real-time basis".

The tentative agreement is under review by both USA and Chinese officials and could fall apart under final reviews, according to one of the people, who spoke on condition of anonymity to discuss internal deliberations.

ZTE supplier Oclaro Inc rose nearly 1 percent while Acacia Communications Inc was down 1.5 percent.

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