Economy

US reaches deal with China's ZTE, commerce secretary says

US reaches deal with China's ZTE, commerce secretary says”

That penalty was assessed following an investigation showing that ZTE had violated USA sanctions and had provided technology to Iran and North Korea.

The initial United States supplier ban was imposed after ZTE failed to comply with an agreement with the Commerce Department in 2017, when it pleaded guilty in federal court in Texas to conspiring to evade U.S. embargoes by illegally shipping USA goods and technology to Iran.

ZTE was originally posted on to the Denied Persons List in April 2018, when it was announced that the U.S. had banned the company from purchasing parts from USA companies, such as Alphabet's (NASDAQ:GOOG) Google and Qualcomm (NASDAQ:QCOM).

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. "It's that ZTE is a state-controlled telecommunications company that poses significant espionage risks, which this agreement appears to do little to address".

The deal allows China's second-largest telecoms equipment firm to restart operations, reaffirm supplier relationships and rebuild trust with global clients, as it works to move on from an episode which it said threatened its very existence.

ZTE's return to the USA market is good news for several American companies.

The deal announced by Commerce Secretary Wilbur Ross allows ZTE to stay in business.

Backfiring plan: Whatever happens to ZTE, the Trump administration's aggressive stance toward China will have unintended consequences.

However, President Trump made a decision to step in and help save Chinese jobs and perhaps gain an upper hand in ongoing trade negations with China.

"Today, [the Bureau of Industry and Security] is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures". ZTE was initially asked to cease operations of main business due to U.S sanctions. However in a surprise turn of events, President Donald Trump suggested he would give ZTE a reprieve in exchange for assurances about its future conduct.

ZTE's survival has been a topic of discussion in high-level US-China trade talks.

In addition to the more than $1.8 billion in combined fines, ZTE will be required to retain a team of specially assigned compliance coordinators answerable to BIS for a period of 10 years.

So for the last month, ZTE has been desperately looking for a way to get back into business. "They will pay for those people, but the people will report to the new chairman, because we are also having them replace the entire management and the entire board".

ZTE supplier Oclaro Inc OCLR.O rose nearly 1 per cent while Acacia Communications Inc ACIA.O was down 1.5 per cent. Oclaro got 18 per cent of its business from ZTE previous year, while 30 per cent of Acacia's total revenue was from ZTE.

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



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