Published: Sun, June 10, 2018
Markets | By Noel Gibbs

Trade war: USA reaches deal with Chinas phone maker ZTE Corp

Trade war: USA reaches deal with Chinas phone maker ZTE Corp

The tentative deal we have learned about today via Reuters, calls out a $1billion fine for the original breach of the April 2017 agreement to not sell to North Korea and Iran plus an additional $400 million in escrow to cover any future violations.

The Commerce Department said that ZTE must also put $400 million in escrow - a sum that would be forfeited if it violated the latest agreement.

The telecommunications equipment maker has been on life support since a seven-year USA ban was imposed in April, breaking a 2017 agreement reached after it was caught illegally shipping goods to Iran and North Korea.

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ZTE pleaded guilty past year to conspiring to evade USA embargoes by buying US components, incorporating them into ZTE equipment and illegally shipping them to Iran, paying almost $900 million (670.54 million pounds) in fines.

Under the deal, ZTE must retain a compliance team selected by the Commerce Department for 10 years. The Chinese authorities' involvement, on the backdrop of ongoing trade negotiations with the USA, have saved ZTE from almost-certain death.

According to Reuters, ZTE has signed a preliminary agreement that will lift the ban on USA companies providing ZTE with goods. Both ZTE and Huawei devices were even banned from being marketed in USA military bases. "We will closely monitor ZTE's behavior", Commerce Secretary Wilbur Ross said.

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In case you haven't been following along, ZTE previously agreed to certain conditions back in March 2017 after they were found to have ignored USA sanctions and shipped products to both North Korea and Iran.

The Commerce Department said the compliance team will be in place for a decade. The Pentagon earlier this month ordered retail outlets on USA military bases to remove from the shelves smartphones made by the two companies.

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. He later tweeted the ZTE talks were "part of a larger trade deal" being negotiated with China. "They will pay for those people, but the people will report to the new chairman".

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Many in Congress, both Republicans and Democrats have strongly opposed how the president was handling the ZTE matter - and blasted the latest twist. The latest sanction in April was because ZTE lied about disciplining some executives responsible for the original violations.

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