ZTE Agrees to $1B Fine Under U.S. Commerce Department Deal
Thursday, June 07, 2018 | Comments

ZTE agreed to pay $1 billion under a new agreement with the U.S. government as a result of ZTE’s violations of its March 2017 settlement agreement. Secretary of Commerce Wilbur Ross announced that the Chinese company will also place an additional $400 million in suspended penalty money in escrow before the Commerce Department’s Bureau of Industry and Security (BIS) will remove ZTE from the denied persons list.

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.

ZTE will also be required by the new agreement to retain a team of special compliance coordinators selected by and answerable to BIS for a period of 10 years. Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws.

ZTE is also required under the new agreement to replace the entire board of directors and senior leadership for both entities. Finally, the new agreement once again imposes a denial order that is suspended, this time for 10 years, which BIS can activate in the event of additional violations during the 10-year probationary period.

“Today, BIS is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Ross. “We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. technology as well as collect the additional $400 million 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 $2.29 billion.”

The purpose of this settlement is to modify ZTE’s behavior while setting a new precedent for monitoring to assure compliance with U.S. law. Embedding compliance officers into the company improves the speed with which the Department of Commerce can detect and deal with any violations, a statement said.

Last week, President Trump tweeted the fine would be $1.3 billion.

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