China’s ZTE will pay $1B fine in deal with US

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

The company will also put $400 million in escrow - a sum that it would forfeit if it violated Thursday's agreement.

Ross also said that the company will have to replace its entire management and board of directors as part of the deal.

Washington lawmakers were indignant last month after Trump offered to rescue ZTE as a personal favor to Chinese President Xi Jinping - even though the company is widely considered a liability for United States national cyber-security.

Still, the resolution of the ZTE case may clear the way for the United States to make progress in its trade talks with China.

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Last year, ZTE admitted to violating U.S. sanctions by selling US-made technology to Iran and North Korea. The ban on buying us parts was imposed in April after the company lied about disciplining some executives responsible for the violations.

Shares in NXP Semiconductors NV rose 4.9 percent in NY after news of the ZTE deal was announced.

The Senate measure would restore penalties on ZTE for violating export controls and bar US government agencies from purchasing or leasing equipment or services from ZTE or Huawei Technologies Co Ltd [HWT.UL], another major Chinese firm. FBI Director Chris Wray said the proliferation of ZTE phones in the USA provides "the capacity to maliciously modify or steal information".

The U.S. government has always been concerned with possible national security threats posed by ZTE and Huawei. "This "deal" with #ZTE may keep them from selling to Iran and North Korea". That ban had effectively put ZTE out of business. The gear maker pleaded guilty a year ago in federal court in Texas for conspiring to violate USA sanctions to Iran. The White House didn't respond to a request for comment.

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Republican Senator Marco Rubio said: "After today's decision to give #ZTE a pass, we have introduced a bipartisan amendment to restore penalties on ZTE".

U.S Senate Democratic leader Chuck Shumer quipped, "By letting ZTE off the hook, the president who roared like a lion is governing like a lamb when it comes to China".

But early this year, the USA government discovered that ZTE had not followed through on its promise. "The Chinese public was up in arms because they believed the USA was destroying ZTE". USA goods exported to China a year ago totaled $130 billion while Chinese imports to the US totaled $506 billion. The U.S. position has been that the fine is a law enforcement action, which should not be included in the discussions around trade.

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.

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