The U.S. Commerce Department has revealed the details of its agreement with China-based telecom network maker ZTE in order to lift the existing seven-year ban on the supply of tech components.
The agreement has seven major components indicating that a mighty corporate from China is dancing to the tunes of the US administration. The main allegation from the U.S. is that ZTE earlier sent telecom equipment to North Korea and Iran, which are considered to be the political and powerful enemies of the U.S.
First, ZTE will pay $1 billion penalty and deposit an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List which was activated on 15 April 2018.
These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement.
The $400 million will be held in a U.S. bank account for 10 years and can be disbursed to the Commerce Department if ZTE fails to abide by the agreement. After 10 years, if there are no violations, the $400 million will be returned to ZTE without any interest.
Second, ZTE will retain special compliance coordinators selected by and answerable to BIS for 10 years. They will monitor ZTE’s compliance with U.S. export control laws on real-time basis.
The department will select the monitor, known as a special compliance coordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years.
Third, ZTE will fund the coordinator and staff of at least six employees.
Fourth, ZTE will replace the board of directors and senior leadership team for two entities that work with global telecom equipment makers and smartphone market. This indicates that all members of ZTE’s leadership at or above the senior vice president level will be removed, along with any executive or officer tied to the wrongdoing.
Fifth, ZTE must report details about all Chinese government ownership and control of ZTE, including public and private shares, to the Commerce Department.
Sixth, ZTE, within 180 days, must post calculations of the U.S. components in its products on its website in Chinese and English.
Seventh, ZTE should not take any action or make any public statement, even indirectly, denying any of the allegations.
The 21-page order signed on June 8 and published on June 11, Monday on the Commerce Department website said these collectively are the most severe penalty BIS has ever imposed on a company.
“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,” said Secretary Ross.
ZTE, which competes with Huawei, Nokia and Ericsson, has pleaded guilty last year to conspiring to evade U.S. embargoes by selling U.S. equipment to Iran. The ban was imposed after the company made false statements about disciplining some executives responsible for the violations. ZTE then ceased major operations.
U.S. lawmakers have attacked the agreement and planned legislation to roll it back, citing intelligence warnings that ZTE poses a national security threat.
The Senate is due to vote as soon as this week on legislation that would block the settlement agreement, included as an amendment to a must-pass defense policy bill.