Published: Mon, June 11, 2018
Money | By Bruce West

The U.S. strikes a deal with Chinese electronics giant ZTE

The U.S. strikes a deal with Chinese electronics giant ZTE

China's No 2 telecommunications equipment maker is back in business. Earlier this month, Trump announced he wanted to help ZTE, as part of negotiating a trade deal with China.

The agreement requires ZTE to pay almost $1 billion Dollars, as well as keep $400 million of penalty in escrow, or in custody of a third party, before the Commerce Department's Bureau of Industry and Security (BIS) will remove the company off of its Denied Persons List. The government will suspend the 10-year ban but it can activate the ban if there are any violations. In addition, the company will put $400 million into an escrow account, which the US can access if it finds ZTE to be out of compliance with the agreement.

ZTE had been barred in April from buying USA components after the Commerce Department said the company violated a settlement after it admitted in 2017 exporting telecoms equipment to Iran and North Korea in violation of US regulations. It's important to note that this deal is not confirmed, with Commerce Department spokesman James Rockas saying that "no definitive agreement has been signed by both parties".

Neither the Commerce Department, the White House nor ZTE immediately responded to requests for comment.

Under the deal, the ban is suspended for 10 years and can be activated by Commerce should the company commit additional violations during that decade-long "probationary period", the department said in a statement announcing the agreement. The company already has a United States court-appointed monitor.

Ross, speaking about the agreement on CNBC today, said he did not think the arrangement would have any effect on tariff talks with China.

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

US President Donald Trump speaks to the press before making his way to board Marine One on the South Lawn of the White House on May 4, 2018 in Washington, DC, as he heads to Dallas, Texas to address the National Rifle Association Leadership Forum. Trump has countered that USA companies were also hurt by the ban because they could no longer sell parts to the firm. "I hope it means something good to us, but we are really focused more on our individual application", Mollenkopf told a corporate governance conference in NY. Shares of Qualcomm Inc QCOM.O rose 2 per cent to US$61.255, while NXP jumped 6.2 per cent to US$121.60.

It wasn't exactly a blazing fast process, costing ZTE billions as the Chinese multinational telecommunications equipment and systems company essentially had to shut down operations for the better part of two months, but you can probably expect phones like the Android Go-powered Tempo Go to be back in stock soon enough.

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