Tuesday, 18 December, 2018

DOC Announces $1.4B Settlement with Chinese Telecom

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Jodi Jackson | 10 June, 2018, 11:19

The fine comes on top of the roughly $1 billion ZTE has already paid for selling equipment to North Korea and Iran in violation of us sanctions.

"Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List".

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.

US President Donald Trump himself linked ZTE's fate to the talks, saying that China's president Xi Jinping had personally requested that he intervene in the case.

The trouble with ZTE goes back to past year when the company admitted to selling USA technology to Iran and North Korea in violation of economic sanctions. Trump has countered that USA companies were also hurt by the ban because they could no longer sell parts to the firm.

The compliance team will report jointly to the new ZTE chairman and the US Commerce Department. The dominance of US semiconductor tech in Chinese phones has actually led to great angst in Beijing, and reveals that American firms are ahead in semiconductor and other technologies.

In return the US Commerce Department would lift its sanctions that prevent ZTE buying from US suppliers. It also has to pay a $1 billion fine and hold another $400 million in escrow.

"ZTE is essentially on probation", said Amanda DeBusk, chair of the global trade and government regulation practice at Dechert LLP and a former commerce official.

The story began last March when ZTE lied to the US government about disciplining employees responsible for supplying, building, and operating telecommunications networks in Iran with USA -supplied components and equipment. For the United States to shut down one of China's largest companies is a very dramatic type of move.

Ross, speaking about the agreement on CNBC on Thursday, said he did not think the arrangement would have any effect on tariff talks with China.

According to a recent CNBC article, US Secretary of Commerce Wilbur Ross has called the deal "the strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls". The move was a direct result of ZTE selling to Iran and North Korea in direct violation of an April 2017 agreement that had ZTE promise to not sell to the aforementioned countries.

The Commerce Department action came after President Trump tweeted earlier this month that he planned to help ZTE because "too many jobs in China" would otherwise be lost.

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