ZTE Escapes US Ban, Will Pay New $1 Billion Fine

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The deal includes a $1 billion penalty against ZTE and a US-chosen compliance department to be embedded into the company.

The measure was introduced hours after Commerce Secretary Wilbur Ross announced that the USA had agreed to lift the seven year ban on us companies selling components and software to ZTE. On Tuesday, Commerce Department spokesman James Rockas confirmed that "no definitive agreement [had] been signed by both parties". Although not specifically stated, the announcement implies that ZTE will no longer be banned from selling technology to other countries and that American companies will no longer be banned from selling components to ZTE, either.

Democrat and Republican senators denounced Trump's offer to ease the ZTE sanctions as an offer that imposed punitive measures the company had already disregarded once before, while garnering no true concessions from China. "That's good", U.S. Senator Marco Rubio tweeted.

ZTE will also be required to change its entire board of directors and hire outside legal compliance specialists who will report to the Commerce Department for 10 years.

But early this year, the USA government discovered that ZTE had not followed through on its promise.

One week after announcing it had ceased major operations as a result of the ban, President Trump tweeted that he was working with Chinese president Xi Jinping to find a way for ZTE to "get back into business, fast".

"BIS [the U.S. government's Bureau of Industry and Security within the Department of Commerce] is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures", said Secretary Ross in a statement. In 2012, the U.S. House Intelligence Committee said the companies posed a national security threat and advised regulators to block any of the companies' mergers or acquisitions in the U.S.

Back in April, as punishment for continued violations of a previous export ban settlement with the US, the US Department of Commerce's Bureau of Industry and Security enacted a denial order against ZTE. "But it will do nothing to keep us safe from corporate & national security espionage".

The Senate measure would restore penalties on ZTE for violating export controls and bar USA government agencies from purchasing or leasing equipment or services from ZTE or Huawei Technologies Co Ltd [HWT.UL], another major Chinese firm.

Senator Ron Wyden of OR, a Democrat and ranking member on the Finance Committee with jurisdiction over trade, and Senate Minority Leader Chuck Schumer of NY called on Congress to reverse the agreement.

Trump argues that bilateral trade deficits reflect bad deals for the USA that need to be rewritten. The first settlement with ZTE set a record for civil and criminal penalties in an export control case.

ZTE supplier Oclaro Inc rose nearly 1% while Acacia Communications Inc. was down 1.5%. Qualcomm rose 1.3 percent.

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