After Helping ZTE, China Warns Firms Not to Be ‘Giant Babies’

Adjust Comment Print

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 ZTE case was a thorn in the side for China ..." The deal also includes a new 10-year ban that is suspended unless there are future violations.

Under the deal, ZTE must retain a compliance team selected by the Commerce Department for 10 years.

"We will closely monitor ZTE's behavior", Ross said in a statement. "If they commit any further violations, we would again be able to deny them access to United States technology as well as collect the additional US$400 million in escrow".

Ross said on Thursday the penalty is the largest the Commerce Department has ever levied.

ZTE did not immediately respond to requests for comment today.

Ross, speaking about the agreement on CNBC on Thursday, said he did not think the arrangement would have any effect on tariff talks with China.

Commerce had imposed a seven-year ban on ZTE doing business in the April as part of a package of penalties levied after the company sold American-made products to Iran, a violation of USA sanctions.

Ross said the U.S. will install its "own compliance people" to monitor the company, and shareholders will bring in new management and board.

The decision amounted to a death sentence to ZTE, which relies on USA parts and which announced that it was halting operations.

ZTE has been banned from obtaining products and services from American suppliers after it breached an agreement reached for illegally shipping products to North Korea and Iran.

Back in April, the United States government announced a complete and total ban of any U.S. components manufacturers from selling to Chinese telecom and handset giant, ZTE (HKG:0763).

The agreement signals that China will be likely to quickly approve the $43 billion acquisition of NXP by Qualcomm Inc, a deal that has been pending for 18 months. For other USA companies, ZTE is a supplier. The team will monitor ZTE's adherence to US export control laws - an arrangement the department described as the most stringent requirements it has ever imposed.

"At about 6 a.m. this morning, we executed a definitive agreement with ZTE".

It wasn't exactly a blazing fast process, costing ZTE billions as the Chinese multinational telecommunications equipment and systems company essentially had to shut down operations for the better part of two months, but you can probably expect phones like the Android Go-powered Tempo Go to be back in stock soon enough.