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ZTE brokers $1.4bn deal with US gov to stay in business

BELEAGUERED CHINESE PHONE MAKER ZTE has brokered a deal with the US government that will end the seven-year import ban imposed on the company.

The deal, announced by US commerce secretary Wilbur Ross on Thursday, will see ZTE hand over $1bn for breaking sanctions on sales to North Korea and Iran, and put an additional $400m in an escrow account for potential future violations.

The agreement also stipulates that ZTE overhaul its board of directors and executive team in 30 days, and requires a US-picked compliance department that will embed within the company and monitor its actions going forward.

“BIS [the US government’s Bureau of Industry and Security within the Department of Commerce] is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Ross in a statement.

“We will closely monitor ZTE’s behaviour. If they commit any further violations, we would again be able to deny them access to US technology as well as collect the additional $400m 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 $2.29bn.”

This whole situation started back in April when ZTE was caught buying US components, incorporating them into its equipment and illegally shipping them to Iran and North Korea. At the time the company was forced to pay $900m in fines, but the company further penalities after it failed to, as promised, dismiss four members of senior staff to discipline 35 more.

This saw the US Department of Commerce slap the firm with a seven-year sales ban, which meant it could no longer buy components from the likes of Dolby and Qualcomm. 

Around the same time, the UK’s National Cyber Security Centre (NCSC) warned UK telecoms firms against using equipment from ZTE due to “national security” concerns. 

Ian Levy, technical director at the NCSC, wrote to UK telcos, ZTE and Ofcom warning that “the use of ZTE equipment or services within existing telecommunications infrastructure would present risk to UK national security that could not be mitigated effectively or practicably,” adding that it would be “impossible” to manage the risks posed if ZTE equipment was deployed at scale. µ

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Source : Inquirer

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