Economy

U.S. to Lift Sanctions Against ZTE (After it Pays $1.4B)

U.S. to Lift Sanctions Against ZTE (After it Pays $1.4B)

In an interview on CNBC, Ross said penalties amounted to $1 billion and that ZTE agreed to install new management and a compliance team picked by the U.S.

Amidst the white-hot trade tension brewing between the worlds two most powerful superpowers, U.S. President Donald Trump surprisingly announced his intention to help the beleaguered Chinese company which we covered here last month.

ZTE has become a critical part of the broader discussions between China and the USA, the two largest economies in the world, over trade tensions and whether the two countries can prevent a trade war that could involve billions of dollars' worth of tariffs.

ZTE had been facing a seven-year ban on doing business in the U.S. That's because it violated an agreement with the U.S. after it got caught evading sanctions against North Korea and Iran.

Recently, ZTE has signed a preliminary agreement that would lift the ZTE ban imposed by the US Department of Commerce that prevented US companies from buying electronic components from Chinese suppliers.

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Under the deal, the ban is suspended for 10 years and can be activated by Commerce should the company commit additional violations during that decade-long "probationary period", the department said in a statement announcing the agreement.

The denial order put ZTE's future into jeopardy because it relies on USA components for so many of its products.

ZTE was originally posted on to the Denied Persons List in April 2018, when it was announced that the United States had banned the company from purchasing parts from USA companies, such as Alphabet's (NASDAQ:GOOG) Google and Qualcomm (NASDAQ:QCOM).

ZTE, which sources up to 30 per cent of its components from the USA, paused its operations as a result and claimed its survival was at risk. It appears that the Trump administration is pretty bothered by the fact that ZTE wanted to replace a top executive with one from another company that was also sanctioned by the US government for being a national security threat.

Ross said on Thursday the penalty is the largest the Commerce Department has ever levied. We will closely monitor ZTE's behavior. The Pentagon earlier this month ordered retail outlets on USA military bases to remove from the shelves smartphones made by the two companies. "And that brings to a conclusion this phase of the development with them", Ross said. The president's extraordinary intervention in an enforcement matter drew widespread criticism on Capitol Hill from members of both parties. The latest sanction in April was because ZTE lied about disciplining some executives responsible for the original violations.


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