Chinese telecommunications giant ZTE will resume trading after agreeing to substantial terms with the US government.
After temporarily being blacklisted by the Trump government due to national security concerns, ZTE has now agreed to a complete overhaul its management and will pay more than $US1 billion in penalties to the US government.
Under the agreement, all members of its leadership at or above a senior vice president level will be replaced within 30 days from 8 June.
The Chinese telco will also have to pay $US400 million in escrow to the United States over the next ten years on top of the initial $1bn “to cover any future violations,” according to Reuters.
These fines are on top of $US892 million already paid by ZTE to the United States.
ZTE must also hire a special compliance coordinator on behalf of the US government.
White House Deputy Press Secretary, Hogan Gidley, defended the move to lift the ban in a statement on Wednesday.
“The massive penalties imposed on ZTE are part of an historic enforcement action taken by the Department of Commerce. This will ensure ZTE pays for its violations and gives our government complete oversight of their future activity without undue harm to American suppliers and their workers,” he said.
The now overturned ban of ZTE was initially enforced due to a number of indiscretions, including a multi-year conspiracy to violate an embargo with Iran, illegally shipping equipment to North Korea and engaging in a scheme to hide unlicensed transactions from the US government.
In April the US Department of Commerce invoked a Denial Order on ZTE, blocking it from buying critical parts from American companies for the next seven years.
Due to ZTE’s reliance on these parts, the move was seen by many as a death sentence to the Chinese telco with BBC News reporting shares in ZTE dropped 39% following the US government’s action.
Speaking in May, President Donald Trump boasted about his government’s action against ZTE – but also indicated there could be more to come.
“Don’t forget, it was my administration, with my full knowledge, that put very, very strong clamps on ZTE. It wasn’t anybody else. It wasn’t President Obama. It wasn’t President Bush. It was me. I put very strong clamps on ZTE. They did very bad things to our country. They did very bad things to our economy,” he said.
“The one thing I will say: They also buy a large portion of their parts for the phones that they make, and they’re the fourth-largest company in terms of that industry. They buy those parts from the United States.
“But the President of China, President Xi, asked me to look at it. I said I would look at it.”
Despite Trump and the Department of Commerce signing off on the deal to save ZTE, there are now plans from within the US Senate to reinstate the ban.
A bipartisan amendment added to the upcoming ‘must-pass’ 2019 National Defence Authorisation Act would effectively kill Trump’s latest deal.
“By including this provision to undo the ZTE deal in the defence bill, the Senate is saying loudly and in a bipartisan fashion that the president is dead wrong to back off on ZTE,” said Senate Minority Leader Chuck Schumer
“The fact that a bipartisan group of senators came together this quickly is a testament to how bad the Trump administration's ZTE deal is and how we will not shy away from holding the president's feet to the fire when it comes to keeping his promise to be tough on China.”