[Update: Senate Rejects Plan] ZTE may return to business as company reportedly signs agreement with US Government
Following the ban on selling U.S.-made hardware (and potentially software) to ZTE earlier this year, it appears that the company may have reached a compromise with the U.S. government, according to Reuters. This compromise would allow the company to once again use U.S.-made components in their products—although at a large cost.
For those unaware, Shenzhen-based ZTE violated sanctions placed on both Iran and North Korea by the U.S. A fine was imposed on ZTE and the company promised to reprimand the employees responsible for the violations, yet they only fired 4 senior employees and failed to discipline the other 35 responsible. As a result, ZTE was banned from using U.S.-made components for 7 years starting from April 2017. Since then, the company appears to have signed a preliminary agreement that would see them pay a larger fine and then have the ban lifted. It’s important to note that this deal is not confirmed, with Commerce Department spokesman James Rockas saying that “no definitive agreement has been signed by both parties.”
The deal which ZTE has agreed to would see the company pay a $1 billion fine, with $400 million in escrow should the company break the terms of agreement again. 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. This means that they could be fined up to $1.7 billion in total.
Also as part of the deal, the company must allow audits of their sites so that it can be seen U.S. components are being used as claimed. They must also post calculations of the usage of U.S.-made components on a public website. Not only that, but the entire board and executive teams must be fully replaced within 30 days from the time of signing the agreement. The U.S. government has not signed the deal yet, however, ZTE has agreed to a previously drawn up deal. This means that the deal will likely go through, possibly saving the company from near-certain demise.
Update 1: Deal Confirmed by Trump Administration
According to Reuters, the deal will require ZTE to change its board and management within 30 days, pay a $1 billion fine, put $400 million in escrow, and retain a new compliance team selected by the U.S.
“We think this settlement, which brought the company, a $17 billion company, to its knees, more or less put them out of business … should serve as a very strong deterrent not only for them but for other potential bad actors,” said Ross.
Update 2: Deal in jeopardy due to Congress
The U.S. Senate voted to reject the Trump administration’s deal with ZTE, reports Axios.
“We’re heartened that both parties made it clear that protecting American jobs and national security must come first when making deals with countries like China, which has a history of having little regard for either. It is vital that our colleagues in the House keep this bipartisan provision in the bill as it heads towards a conference,” said Senators Chuck Schumer (D-NY), Tom Cotton (R-AR), Chris Van Hollen (D-MD), and Marco Rubio (R-FL) in a joint statement.
Now the provision must pass in the U.S. House of Representatives for the plan to truly fall through. This means ZTE’s future is once again uncertain. We will keep you updated on any new major developments.
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