Chinese phone maker ZTE saved from brink after deal with US

ZTE has been banned from purchasing sensitive technology from the US over its illegal sales to Iran and North Korea

Report Tentative ZTE Deal with U.S. Could Bring Fine to $1.7B AFP 5 Jun 2018Washington DC

US Commerce Secretary Wilbur Ross said his department will end sanctions against embattled Chinese telecom equipment maker ZTE, resolving one issue that has increased tensions between Washington and Beijing.

Trump barged into the ZTE case last month by tweeting that he was working with President Xi Jinping to put ZTE "back in business, fast" and save tens of thousands of Chinese jobs.

Early reports claimed that ZTE had already signed an agreement with the usa with these terms, but a spokesperson in touch with Politico says that "no definitive agreement has been signed by both parties". Sources say the preliminary deal includes a $1 billion fine against the Chinese company and an additional $400 million in escrow in the event of future violations.

The 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 USA embargoes by illegally shipping us goods and technology to Iran.

The agreement also forces ZTE to replace its board of directors and executive team and installs a USA -chosen compliance team.

In April, the US Commerce Department blocked American firms from selling parts or providing services to ZTE, which also makes telecommunications equipment.

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Still, the resolution of the ZTE case may clear the way for the United States to make progress in its trade talks with China.

There are also some political ramifications to this deal - which are outside the scope of AnandTech's purview - but as the New York Times notes, many see this as part of a larger peace offering in ensuring a new trade deal between the U.S. and China. FBI Director Chris Wray said the proliferation of ZTE phones in the US provides "the capacity to maliciously modify or steal information".

The company will also be required to change its board of directors and executive team within 30 days.

For those unaware, Shenzhen-based ZTE violated sanctions placed on both Iran and North Korea by the U.S. The company already has a U.S. court-appointed monitor.

Trump has indicated he views the handling of ZTE as part of his administration's broader effort to renegotiate trade conditions with China. A big part of its business is in smartphones, and it relies on US companies, such as Qualcomm, for the parts inside those phones.

USA goods exported to China a year ago totaled US$130 billion while Chinese imports to the USA totaled US$506 billion.

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