USA Reaches Agreement with Chinese Telecommunications Co. ZTE

USA Reaches Agreement with Chinese Telecommunications Co. ZTE

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.

Said "violator" needs to pay a penalty of a whopping $1 billion up front, also being required to put an additional $400 million in escrow as collateral for any prospective future breaches of trade laws. The U.S. Department of Commerce wishes to amend the settlement agreement so that the $361 million that the company had already paid would be included. You see, the company has been flourishing in the United States as the fourth biggest phone maker only to be sanctioned for lying to the U.S. government for violating laws that must be followed in relation to transactions with North Korea and Iran.

The decision amounted to a death sentence to ZTE, which relies on USA parts and which announced that it was halting operations.

In addition to the fine, a compliance team chosen by the United States will be embedded at ZTE and the Chinese company must change its board and executive team. The agreement calls for a 10-year suspended ban that can be activated if ZTE commits new trade violations.

Whatever the case, as long as ZTE can keep its nose clean and adhere to the terms of this newest deal with the US government, it will be able to solider on as China's second-largest smartphone OEM.

Despite this new change, the Pentagon has still ordered all ZTE and Huawei phones to be removed from its military bases. Instead, ZTE seems to have given bonuses to those same executives.Because of this, the Department of Commerce ordered the denial of export privileges against ZTE, which also meant that American companies would no longer be able to sell equipment to ZTE. But Reuters reports that ZTE and the usa government have signed a preliminary agreement that will lift the Denial Order.

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The agreement follows growing criticism within the Republican party of the president's handling of trade negotiations with China and attempts by some in Congress to rein in his authority to impose tariffs on the EU, Canada and other allies in the name of national security. The move will allow the company to get back into the business.

Commerce Secretary Wilbur Ross told CNBC on Thursday the deal was tough and would keep ZTE on a short leash.

"But to just shut the company down due to senior level management mistakes doesn't make sense nor help the global telecom market", he added. Their function will be to monitor on a real-time basis ZTE's compliance with US export control laws.

The announcement boosted shares in USA component makers including Acacia Communications, Oclaro and Lumentum Holdings.

"The total deal is $1.4 billion".

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