USA reaches deal with China's ZTE

ZTE deal

ZTE deal

China's No 2 telecommunications equipment maker is back in business.

"The settlement on ZTE does not significantly impact the probability that the us will impose tariffs on China", said Eurasia Group analysts in a report.

The agreement requires ZTE to pay almost $1 billion United States dollars, as well as keep $400 million of penalty in escrow, or in custody of a third party, before the Commerce Department's Bureau of Industry and Security (BIS) will remove the company off of its Denied Persons List. The deal also includes a new 10-year ban that is suspended unless there are future violations.

"We still retain the power to shut them down again", Commerce Secretary Wilbur Ross said Thursday in an interview on CNBC. "If they commit any further violations, we would again be able to deny them access to USA technology as well as collect the additional $400 million in escrow".

On Tuesday, it was reported that ZTE, the fourth-largest smartphone maker in the United States by market share, had agreed in principle to a settlement that would lift the seven-year Commerce Department ban preventing U.S. companies from doing business with it. However, a Commerce Department spokesman said that "no definitive agreement has been signed by both parties". He tweeted that he wanted the Commerce Department to work with ZTE on getting the ban lifted.

Neither the Commerce Department, the White House nor ZTE immediately responded to requests for comment.

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The deal includes a $1 billion penalty against ZTE, and a compliance team, chosen by the USA, will be embedded at the company, Commerce Secretary Wilbur Ross told CNBC Thursday morning.

"We are literally embedding a compliance department of our choosing into the company to monitor it going forward".

ZTE's survival has been a topic of discussion in high-level US-China trade talks.

Ross said on Sunday he had been having frank, useful talks in China about exports, as Washington presses its message to Beijing about structural economic changes amid the festering trade dispute.

ZTE has been banned from obtaining products and services from American suppliers after it breached an agreement reached for illegally shipping products to North Korea and Iran. 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.

Today's agreement was "a prerequisite for making broader progress", DeBusk said. "I hope it means something good to us, but we are really focused more on our individual application", Mollenkopf told a corporate governance conference in NY.

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