New details have reportedly emerged about the settlement ZTE will need to pay to the U.S. government before business can resume with American components manufacturers. For the most part, that’s said to include both a $1 billion fine and the placement of $400 million in escrow to be held in a U.S.-based bank of ZTE’s choosing. Including the previously paid $361 million as part of an initial settlement for its behavior, that brings the total set to be paid by the company to just over $1.76 billion. The escrow holdings, meanwhile, will be held for as much as ten years and will be distributed to the Commerce Department if ZTE fails to follow the rules of the new agreement. That includes both public and private shares. The company will also be required to fund a compliance coordination team of no fewer than six staff, to which it will report starting 30 days from the agreement and for the entire term of the agreement. At the end of the ten-year term, the escrow will be returned to ZTE on the condition that there have been no further violations.
In an attempt to alleviate the fears of some lawmakers regarding what kind of security risk the company might pose, ZTE will be required to identify all Chinese government ownership and control at the company. Not content to stop there, the agreement will reportedly see every executive employee of the company at or above the senior vice president level fired. Any other officers or executives involved in the unsanctioned trade with North Korea and Iran will also be losing their jobs, while the entire board of directors at ZTE will have to be replaced with two corporate entities. Moreover, all of its use of U.S.-made components and details surrounding that will need to be posted on its website in English and Chinese. Lastly, the company must agree not to deny or imply the denial of its role in the embargo breach.
Of course, this is just the latest development in ZTE’s ongoing row with the U.S. government over its decision to ignore both a ban on business with Iran and North Korea and ensuing fines. However, it could very well mark the end of that ban if ZTE complies with the details outlined. That would be good news for the company, which has suffered sizeable losses associated with its supply chain and ability to meet demand. With that said, there is one other roadblock in ZTE’s way at this juncture. Political representatives in the U.S. still need to vote on the agreement to move things forward. That may prove a problem since many in the legislative body believe ZTE poses a threat to national security due to its close ties with the Chinese government. Primarily that stems from comments made which suggest the agreement was reached as a personal favor from President Donald Trump to China’s president.
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