ZTE and U.S. Government Reach $1.4 Billion Settlement Deal to End ZTE Ban

On Thursday June 7, U.S. Secretary of Commerce Wilbur Ross announced a new agreement with Chinese telecommunications company ZTE Corporation that will replace the earlier suspended denial order imposed by the Commerce Department’s Bureau of Industry and Security (BIS).

ZTE was placed on the Denied Persons List for violating terms from the March 2017 settlement agreement with the U.S. government which ZTE already paid $892 million for in penalties.

The initial settlement was for violating U.S. trade embargoes and sanctions by selling supplies, building, and operating telecommunication networks in Iran and shipping telecommunications equipment to North Korea respectively. In the settlement, ZTE agreed to a seven-year suspended denial of export privileges if they violate the agreement or commit any additional violations. In spite of this, ZTE violated the terms of the March 2017 settlement once again by giving involved employees bonuses after informing the U.S. government that it would instead discipline them.

The announcement and enforcement of the seven-year ban penalty came as a great shock to China. Last month, U.S. President Donald Trump also tweeted that he would work closely with President Xi to resolve the ZTE case.

The new agreement includes payments of $1 billion in fine and $400 million in escrow as suspended penalty money. This is the largest penalty BIS has ever levied. Additional compliance measures include attaining a team of coordinators specially selected by and answerable to BIS for a period of 10 years. This is to monitor ZTE’s compliance with U.S. export control laws.

“We will monitor ZTE’s behavior closely and if they commit any further violations, we will not hesitate to deny them access to U.S. technology as well as collect the additional $400 million in escrow,” said Secretary Ross. “The first settlement with ZTE set a record for civil and criminal penalties in an export control case. This new agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.”