Markets

ZTE to Pay $1.7 Billion Settlement to Come Back to US

ZTE to Pay $1.7 Billion Settlement to Come Back to US

ZTE will also put $400 million in an escrow account.

These hefty monetary fines are in addition to the $892 million fine that ZTE already paid for its original transgressions, which involved violating US sanctions by selling telecommunications equipment to Iran and North Korea.

The sources requested anonymity because they were not authorized to publicly discuss the matter.

U.S. Secretary of Commerce Wilbur Ross confirmed to CNBC that the U.S. government has reached an agreement with ZTE to lift the crippling supply ban imposed on April 16. The preliminary agreement was signed by ZTE over the weekend, but the Chinese company has yet to sign the amended settlement agreement. For other US companies, ZTE is a supplier.

The settlement in March 2017 was reached after ZTE was found to have violated a USA trade embargo by engaging in a multi-year conspiracy to use equipment that originated in the United States for telecommunications networks in Iran. Not only that, but the entire board and executive teams must be fully replaced within 30 days from the time of signing the agreement. ZTE will also provide access to a team for a period of 10 years to monitor the company's compliance with USA export control laws. The June 7 settlement is seen as creating a positive environment for also negotiating an end to the current China-US trade war, but Ross said the enforcement action against ZTE is "quite separate and apart" from the trade issue. Senator Marco Rubio (R-FL) has floated a proposal for Congress to block this sort of deal.




The company was found to have shipped its sophisticated telecommunications equipment to both nations and to have repeatedly lied to US investigators about its actions.

The penalties are in addition to the $892 million in penalties ZTE already paid.

ZTE is based in Shenzhen, close to Hong Kong, and was founded in 1985.

But the company admitted that while it had fired the four senior employees, it had made false statements about the others, the officials said.

The May ban came after the government determined that ZTE violated terms of its 2017 settlement by failing to fire employees involved with illegally shipping USA equipment to Iran and North Korea. Their function will be to monitor ZTE's compliance with US export control laws. Qualcomm and Intel count ZTE as a customer, as do smaller component makers Oclaro and Acacia, both of which saw their stock prices drop sharply when the ZTE export ban was announced. This compromise would allow the company to once again use US -made components in their products-although at a large cost. The company shut down manufacturing and other major operations on May 10, idling most of its 75,000-strong workforce.