Published: Fri, June 08, 2018
Finance | By Gustavo Carr

ZTE will reportedly pay over $1 billion to lift U.S. ban

ZTE will reportedly pay over $1 billion to lift U.S. ban

Shares of Acacia Communications (ACIA), Lumentum Holdings (LITE) and other optical-component makers climbed Thursday after U.S. Commerce Secretary Wilbur Ross said the Trump administration has hammered out a deal to lift sanctions on Chinese telecom gear maker ZTE.

ZTE will be forced to pay a $1 billion fine, make changes to its executive team, and allow a USA compliance team to oversee activities.

In April, the Chinese group was cut off from United States technology products for violating U.S. sanctions against North Korea and Iran - measures which threatened to put ZTE out of business.

The Commerce Department, which oversees sanctions enforcement, told Reuters on Tuesday that "no definitive agreement has been signed by both parties". Analysts estimate that four-fifths of ZTE's products have American companies.

Republican Senator Marco Rubio said: "After today's decision to give #ZTE a pass, we have introduced a bipartisan amendment to restore penalties on ZTE". Earlier this month, Trump announced he wanted to help ZTE, as part of negotiating a trade deal with China.

In addition to the fine, a compliance team chosen by the United States will be embedded at ZTE and the Chinese company must change its board and executive team.

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.

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The US has struck a deal with Chinese telecom giant ZTE, resolving a controversy that had put the Chinese telecom giant in peril.

ZTE had been blocked from accessing USA technology for export control violations.

The Trump administration has complained about a range of Chinese industrial policies that it says disadvantages US companies, including compulsory licensing arrangements and rampant theft of trade secrets. However, some sources who corresponded with me say that the Chinese government has purposely held up the acquisition of NXP Semiconductors by Qualcomm while it negotiates a more positive outcome for ZTE.

US intelligence agencies have concluded that ZTE poses a "significant" national security threat.

U.S Senate Democratic leader Chuck Shumer quipped, "By letting ZTE off the hook, the president who roared like a lion is governing like a lamb when it comes to China".

A US investigation into ZTE was launched after Reuters reported in 2012 the company had signed contracts to ship hardware and software worth millions of dollars to Iran from some of the best-known usa technology companies.

That was a serious problem for ZTE because the company is heavily dependent on U.S. components for its smartphone business. The first settlement with ZTE set a record for civil and criminal penalties in an export control case.

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