China's ZTE Reportedly Strikes Preliminary Deal To Lift U.S. Ban


Following the ban on selling USA -made hardware (and potentially software) to ZTE earlier this year, it appears that the company may have reached a compromise with the us government, according to Reuters. He said the Commerce Department is fining the company $1.4 billion, including $400 million in escrow, on top of a $1 billion US penalty a year ago.

"We will closely monitor ZTE's behavior", Ross said in a statement.

Today a U.S. Commerce Department spokesman said that an agreement is pending between the United States and ZTE that would see ZTE pay a hefty fine and in exchange be allowed to purchase crucial components again.

In April, the Commerce Department blocked ZTE from importing American components for seven years, having concluded that it had deceived US regulators after it settled charges last year of violating sanctions that were imposed against Iran and North Korea. It also includes $400 million in escrow to cover any future violations and requires ZTE to change its board of directors and executive team within 30 days.

The ban forced ZTE, which relies on USA components, to halt operations and would have ended most of its business.

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"The settlement on ZTE does not significantly impact the probability that the USA will impose tariffs on China", said Eurasia Group analysts in a report. China has vowed to retaliate on everything from US soybeans to airplanes, and said it will abandon its commitments if the USA follows through on its tariff threat. ZTE's failure to comply with these terms triggered the suspended denial order that prohibits American companies from doing business with the Shenzhen-based company, plunging it into crisis.

One of the U.S. companies caught in the crossfire is Qualcomm Inc QCOM.O , whose products account for the lion's share of chips inside ZTE smartphones. "When it comes to China, despite his tough talk, this deal with ZTE proves the president just shoots blanks".

According to the Hong Kong-based English-language daily, "The reprimand and forfeiture of bonuses were part of the original settlement that ZTE had reached with the USA government". The agreement signals that China will be more likely to approve the $43 billion acquisition of NXP by Qualcomm Inc., a deal that has been pending for 18 months. His administration has imposed tariffs on steel and aluminum that are targeted at Beijing, and has threatened to raise barriers on other Chinese-made products. The team will monitor ZTE's adherence to US export control laws - an arrangement the department described as the most stringent requirements it has ever imposed.

ZTE's survival has been a topic of discussion in high-level U.S.