US reveals details of ZTE settlement

SWEEPING CHANGES::ZTE must pay a US$1 billion fine and place US$400 million in escrow, which it could collect after 10 years if it abides by its agreement with the US

Reuters, WASHINGTON

Wed, Jun 13, 2018 - Page 10

ZTE Corp’s (中興) settlement with the US Department of Commerce that would allow China’s No. 2 telecommunications equipment maker to resume business with US suppliers was made public on Monday, days after the company agreed to pay a US$1 billion fine, overhaul its leadership and meet other conditions.

However, the ban on buying US parts, imposed by the department in April, would not be lifted until the company pays the fine and places US$400 million more in escrow in a US-approved bank, the agency said.

ZTE, whose survival has been threatened by the ban, secured the lifeline settlement from the US President Donald Trump administration on Thursday last week.

White House trade adviser Peter Navarro on Sunday said that Trump agreed to lift the ban as a personal favor to Chinese President Xi Jinping (習近平).

ZTE must replace the boards of directors of two corporate entities within 30 days, according to a 21-page order signed on Friday last week and published on Monday on the department’s Web site along with the settlement agreement.

All members of ZTE’s leadership at or above the senior vice president level also must be terminated, along with any executive or officer tied to the wrongdoing.

ZTE last year pleaded guilty to conspiring to evade US embargoes by selling US 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.

Under the settlement, ZTE is to pay a total civil penalty of US$1.7 billion, including US$361 million already paid as part of a March last year agreement, the US$1 billion fine and the US$400 million that is to go into escrow.

The US$400 million is to be held in a US bank account for 10 years and can be disbursed to the department if ZTE fails to abide by the agreement.

After 10 years, if there are no violations, the US$400 million would be returned to ZTE.

US lawmakers have attacked the agreement and planned legislation to roll it back, citing intelligence warnings that ZTE poses a national security threat to the US.

The US 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.

As part of the order, ZTE must identify in detail to the department all Chinese government ownership and control of ZTE, including public and private shares.

The department would also select a monitor, known as a special compliance coordinator, within 30 days to report on compliance by ZTE and its affiliates worldwide for 10 years.

The coordinator would have a staff of at least six employees funded by ZTE.

A separate monitor was last year appointed to a three-year term by a US federal court in Texas.

Under the deal, ZTE also agreed to allow the US government easier access to verify the company’s shipments for items subject to the regulations.

In addition, within 180 days, ZTE must post calculations of the US components in its products on its Web site in Chinese and English.

ZTE is not allowed to take any action or make any public statement, even indirectly, denying any of the allegations.