In the ongoing ZTE saga and the company’s battle with the U.S. Department of Commerce, ZTE will pay an additional $1 billion fine to the U.S. and has agreed to other terms in order to resume business with U.S. companies.
In case you haven’t been following along, ZTE previously agreed to certain conditions back in March 2017 after they were found to have ignored U.S. sanctions and shipped products to both North Korea and Iran. Following that agreement, ZTE was found to have paid out bonuses to a number of employees instead of disciplining them as previously agreed. As a result, BIS activated a suspended denial order against the company which effectively prohibited them from using U.S.-built components in their devices and selling their products in the States.
In addition to the new fine, on top of the $892 million paid to the U.S. government from a previous settlement, the company must also place $400 million in an escrow account with the Bank for International Settlements (BIS). Should ZTE break any of the terms of the new agreement with the U.S. during its ten-year probationary period, that money will be paid out to the U.S. government.
“Today, BIS is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Secretary of Commerce Wilbur Ross. “We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. 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.”
In addition to the additional fines, ZTE will also replace their entire board of directors and senior leadership, as well as retain a special compliance team answerable to BIS for 10 years. Should the Chinese company break any of the U.S. export control laws during this period, the BIS can activate the suspended denial order which would, once again, disallow them from doing business with U.S. companies in any capacity.
Once the company has completed the required actions, the BIS will remove them from the Denied Persons List and the company will be able to once again be able to conduct business with U.S. companies, including for key components in their devices, as well as sales of their products in the United States.
Last Updated on June 7, 2018.