June 9: The US Commerce Department has struck a deal with ZTE that would see the Chinese manufacturer pay a fine of $1 billion for violation of trade agreements. The ongoing tussle has been a major flashpoint in trade tensions between the US and China.
US Secretary of Commerce Wilbur Ross said that the penalty was the strictest and largest imposed by the Commerce Department until now against any violator of export controls. In addition to payment of the hefty sum, the deal would also involve placing a compliance team in ZTE.
The management of the company will also be witnessing a shift under the deal as the manufacturer has agreed to change its board of directors along with the executive team. A reserve fund of $400 million will be earmarked in escrow to cover for future violations if any.
The Commerce Department has been behind ZTE after it was found that the company had been illegally dealing with Iran and Korea, following which sanctions were imposed over ZTE for violation of trade agreements. The Chinese manufacturer was banned from purchasing any products from its suppliers in the US. The ban would now be lifted after the payment is made, provided the company sticks to the terms in all aspects.
The deal has however drawn criticism from Republic and Democratic senators, who said that the deal would pave the way for ZTE and China to spy on Americans. Senator Ron Wyden said in his tweet that the deal will help ZTE to sell American technology to countries like North Korea and Iran with whom ZTE was alleged to be carrying out illegal trade. Senator Marco Rubio too criticised the move adding that ZTE was a greater threat than steel from Argentina or Europe.