Commerce Secretary: US reaches deal with China's ZTE

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

In April, the US Department of Commerce issued an order barring US companies from selling software or hardware to ZTE for seven years, after the company violated US sanctions by working with Iran and North Korea. A ZTE spokesman couldn't be reached for comment.

The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE stay in business in exchange for paying an additional $1 billion in fines and agreeing to let USA regulators monitor its operations.

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

Problems started to pile up for ZTE as soon as the United States ruling highlighted how the company had violated a sanctions agreement involving illegal exports to Iran and North Korea.

Ross said on Sunday he had been having frank, useful talks in China about exports, as Washington presses its message to Beijing about structural economic changes amid the festering trade dispute. It appears that the Trump administration is pretty bothered by the fact that ZTE wanted to replace a top executive with one from another company that was also sanctioned by the USA government for being a national security threat.

Meanwhile, the South China Morning Post reported Wednesday that ZTE has been sending out letters of reprimand to 35 current and former employees who were associated with the sanction-busting, and is even "seeking to claw back bonuses from those who have left the company".

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"At about 6 a.m. this morning, we executed a definitive agreement with ZTE", Ross told CNBC. "Congress should move in a bipartisan fashion to block this deal right away".

ZTE depends on US-made components to build its smartphones and networking equipment.

The Commerce Department plans to amend the agreement to count part of ZTE's previous fine from past year ($360 million) as part of the total penalties. Shenzhen-based ZTE has a subsidiary in Richardson, Texas. At that time, the US discovered documents that showed how ZTE established new entities to sell USA technologies to Iran.

The probe found that ZTE had conspired to evade USA embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran.

While the agreement has not been finalized, ZTE has apparently agreed to pay another hefty fine to revive its business. "It would also allow unfettered site visits to verify that U.S. components are being used as claimed by the company", Reuters stated. Chinese telecom firms like ZTE and Huawei are suspected of having ties to the Chinese military, and their products already are banned on many USA military bases.

The suppliers include Qualcomm, Broadcom, and Intel Corp, as well as smaller optical component makers Acacia Communications Incand Oclaro.

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