US, China Reach Deal to End Sanctions
on Telecom Giant ZTE
June 8, 2018
The U.S. and China have reached a deal to lift sanctions against the
giant Chinese ZTE telecommunications company that hobbled the firm when
the United States banned the sale of American-made components it needed
for its consumer products, U.S. Commerce Secretary Wilbur Ross said
Ross told CNBC the accord will force ZTE, which employs nearly 75,000
workers, to pay a $1 billion fine for violating the U.S. ban on trade
with North Korea and Iran, put another $400 million in escrow, and
within 30 days replace its entire management and board.
Ross said going forward, the deal imposes the "most strict" compliance
on ZTE. He said the penalties should serve as a very strong deterrent
for "other potential bad actors" to force compliance with U.S. trade
"If they do violate it again, in addition to the billion dollars they
are paying us up front, we had them put $400 million in escrow," he
said. "The total deal is $1.4 billion. That money will be forfeited if
they violate anything ... and we still retain the power to shut them
ZTE must hire a new compliance team selected by the U.S. Commerce
Department for a 10-year term.
"We are literally embedding a compliance department of our choosing into
the company to monitor it going forward," Ross said. "They will pay for
those people, but the people will report to the new chairman."
"This is a pretty strict settlement," he added. "The strictest and
largest settlement fine that has ever been brought by the Commerce
Department against any violator of export controls."
The commerce secretary said he did not think the settlement of the ZTE
dispute would have any impact on ongoing contentious trade and tariff
talks between the U.S. and China, the world's two biggest economies.
Washington and Beijing have threatened each other with massive new
tariffs on up to $150 billion of exports from the two countries, the
fallout from the U.S. demand that China buy more American goods to
sharply cut last year's $375 billion Chinese trade surplus with the U.S.
The ZTE agreement was reached after weeks of talks between U.S. and
Chinese officials. The dispute stemmed from a U.S. decision to block
sales of American-made components ZTE needs to manufacture its products
for seven years, until 2025. The agreement calls for a 10-year suspended
ban that can be activated if ZTE commits new trade violations.
Most of the world first heard of the dispute over ZTE nearly a month ago
following a tweet by U.S. President Donald Trump.
U.S. lawmakers, both Republicans and Democrats, balked at Trump's effort
to reach an accord on ZTE, saying that firm was a threat to U.S.
national security through intelligence gathering on its devices. But
Trump ignored the complaints, pushing Ross to settle the dispute.
Later Thursday, Republican Senator Marco Rubio of Florida said: "Huawei
and ZTE pose a serious threat to America's national security. ... After
today's decision to give #ZTE a pass, we have introduced a bipartisan
amendment to restore penalties on ZTE."
Senate Minority Leader Chuck Schumer of New York said, "There is
absolutely no good reason that ZTE should get a second chance and this
decision marks a 180-degree turn away from the president's promise to be
tough on China. ... It's up to Congress now to act to reverse the deal."
They both were part of a bipartisan effort behind the amendment.