Chinese phone maker ZTE saved from brink after deal with U.S.

ZTE signs preliminary agreement to lift US ban

ZTE will reportedly pay over $1 billion to lift US ban

The President said the company would have to pay a $1.3 billion fine and change management for the ban to be lifted, and a few days ago, ZTE reportedly reached an agreement with the Department of Commerce.

The logo of ZTE Corp is seen on its building in Beijing, China April 19, 2018. The government will suspend the 10-year ban but it can activate the ban if there are any violations.

The company will also have to keep a team of "compliance coordinators" for the next 10 years, which will be selected by the DoC. The U.S. also needs China's help negotiating the denuclearization of North Korea ahead of a June 12 summit between President Donald Trump and North Korea's Kim Jong Un.

Commerce Secretary Wilbur Ross told CNBC this morning that the us has struck a deal to lift sanctions on the electronics giant. Apparently, the U.S. is fining ZTE to the tune of $1 billion with $400 million in escrow on top of that to cover future violations.

The Department of Commerce notes this is the largest penalty it has ever levied on a single company.

ZTE did not immediately respond to requests for comment on Thursday. China has vowed to retaliate on everything from US soybeans to airplanes, and said it will abandon its commitments if the USA follows through on its tariff threat.

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On Tuesday, it was reported that ZTE, the fourth-largest smartphone maker in the United States by market share, had agreed in principle to a settlement that would lift the seven-year Commerce Department ban preventing U.S. companies from doing business with it.

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

ZTE has been banned from obtaining products and services from American suppliers after it breached an agreement reached for illegally shipping products to North Korea and Iran. Separately, Qualcomm is trying to get Chinese approval for its pending US$44 billion acquisition of NXP Semiconductors NV NXPI.O . That left a USA deficit of more than $375 billion.

President Donald Trump has drawn fire from Congress for intervening in the case to rescue a Chinese company that had violated USA sanctions against two rogue nations that have been pursuing nuclear weapons programs. The team will monitor ZTE's adherence to USA export control laws - an arrangement the department described as the most stringent requirements it has ever imposed. "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.

ZTE supplier Oclaro Inc OCLR.O rose nearly 1 per cent while Acacia Communications Inc ACIA.O was down 1.5 per cent. Oclaro got 18 per cent of its business from ZTE previous year, while 30 per cent of Acacia's total revenue was from ZTE. Qualcomm rose 2 per cent.

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