ZTE agrees to pay $1 billion fine to stop US Denial Order

ZTE building logo

ZTE has been persona non grata in the US for some time now, with the Trump administration having slapped a Denial Order on the company preventing it from operating in North America. The president expressed a desire to get the Chinese firm "back into business" and today that is a step closer to happening.

Today the US Department of Commerce has come to an agreement with the company, which will pay a $1 billion fine for violating sanctions. In addition, ZTE will make changes to management, and put a further $400 million in escrow to cover possible future fines.

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Described as "severe additional penalties and compliance measures", the payment and changes will see ZTE removed from the Denied Persons List by the Bureau of Industry and Security (BIS). The Department of Commerce said that the measures and fine come in addition to the $892 million in penalties ZTE paid back in March 2017.

On top of this, the Chinese firm will be very closely monitored for the next decade, the USDC said:

ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. Their function will be to monitor on a real-time basis ZTE’s compliance with US export control laws. This is the first time BIS has achieved such stringent compliance measures in any case.  ZTE is also required under the new agreement to replace the entire board of directors and senior leadership for both entities.  Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the ten-year probationary period. These collectively are the most severe penalty BIS has ever imposed on a company.

In a statement Secretary of Commerce Wilbur Ross said:

Today, BIS is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures. We will closely monitor ZTE's behavior. If they commit any further violations, we would again be able to deny them access to US technology as well as collect the additional $400 million in escrow. The first settlement with ZTE set a record for civil and criminal penalties in an export control case.  This new settlement agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.

Image credit: testing / Shutterstock

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