Rubio on Trump's 'very bad' ZTE deal

08 June, 2018, 06:50 | Author: Elaine Woods
  • The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

Penalties amounted to $1 billion, and ZTE agreed to install new management and a compliance team picked by the U.S., Ross told CNBC. Not only that, but the entire board and executive teams must be fully replaced within 30 days from the time of signing the agreement.

The US had previously blocked ZTE's access to US suppliers, saying the company had violated a sanctions settlement.

The U.S. and China are in a race to build the first 5G network, in part because it means jobs. Further, the sources added that the Commerce Department plans to amend its 2017 settlement agreement and count the $361 million ZTE paid as a part of that.

The agreement comes as U.S. President Donald Trump seeks trade concessions from China and negotiations continue to avoid a trade war between the world's two largest economies. The gear maker pleaded guilty previous year in federal court in Texas for conspiring to violate US sanctions to Iran.

ZTE will pay a $1 billion penalty, and put another $400 million in escrow to cover possible future violations before being stricken from a sanctions list.

Citing "sources familiar with the matter", Reuters disclosed Tuesday that ZTE could soon be allowed to buy the USA products. Since the original USA penalty would have put ZTE out of business, Chinese authorities would have retaliated against a prominent US company, he said.

In April, the Chinese group was cut off from U.S. technology products for violating USA sanctions against North Korea and Iran - measures which threatened to put ZTE out of business. Chinese telecom firms like ZTE and Huawei are suspected of having ties to the Chinese military, and their products already are banned on many U.S. military bases.

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In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived USA regulators after it settled charges last year of sanctions violations: Instead of disciplining all employees involved, Commerce said, ZTE had paid some of them full bonuses and then lied about it.

Shares in NXP Semiconductors NV rose 3.8 per cent in early trading in NY after news of the ZTE deal was announced.

A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China May 14, 2018.

Why did the Trump administration offer ZTE a lifeline?

Shares of Acacia and Oclaro extended their gains on Tuesday in heavy trading after news of the preliminary deal, ending up 1.7 percent and 1.8 percent, respectively.

There was no immediate comment from the Chinese government on the ZTE agreement.

The Trump administration came up with a tentative deal in May to get ZTE back into business by lifting the ban and imposing other punishments instead. At that time, the US discovered documents that showed how ZTE established new entities to sell USA technologies to Iran.

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