Chinese jobs saved: US reaches deal with ZTE

The United States has reached a deal with Chinese telecommunications giant ZTE that includes a $1 billion fine, according to Commerce Secretary Wilbur Ross.

The fine comes on top of the roughly $1 billion ZTE has already paid for selling equipment to North Korea and Iran, in violation of US sanctions.

Ross, speaking on CNBC on Thursday, said that ZTE also must put $400 million in escrow, which will be forfeited if there are any violations of the agreement.

Ross also said that a compliance team picked by the US will be embedded at ZTE and that the Chinese company must change its board and executive team in 30 days.

The latest furore with ZTE kicked off in April after the company was banned from importing American components for seven years. The commerce department concluded that ZTE deceived US regulators after it settled charges last year of violating sanctions against Iran and North Korea.

"ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored," Ross said at the time.

In the days following the announcement, ZTE said it was ceasing major operating activities of the company, and sellers of white-labelled devices such as Australia's Telstra scurried to find replacements.

Must read: Dissecting ZTE: What it is and what it wants to be

Less than a month after the ban on ZTE, United States President Donald Trump directed the US Department of Commerce to allow ZTE to operate again.

"President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast," the president tweeted.

"Too many jobs in China lost. Commerce Department has been instructed to get it done!"

In March 2017, ZTE had been fined $1.2 billion by the United States for directly, or through third-party distributors, shipping $32 million worth of products containing American-made equipment to Iran between 2010 and 2016 without the proper licensing.

The heads of the CIA, FBI, NSA, and the director of national intelligence to the Senate Intelligence Committee warned in February that Americans not use products from Huawei and ZTE.

Also Read: Trump reverses course on ZTE, citing job losses in China | ZTE ceases main operations after US ban | RIP ZTE: Which Chinese smartphone company is next?

This was followed in April by the UK National Cyber Security Centre reportedly sending a letter to British telcos warning of the risks of using ZTE equipment, which would create national security risks that could not be mitigated against.

In March, ZTE reported 2017 full-year net profit of 4.6 billion yuan, following the net loss of 2.4 billion yuan for 2016 -- a year in which the company said it would have made 3.8 billion yuan in net profit without a payment of $892 million to the United States after pleading guilty to breaking US trade sanctions.

For 2017, the company reported revenue of 109 billion yuan, up 7.5 percent year-on-year, and received 64 billion yuan from its carrier networks division, 35 billion yuan in the consumer segment, and 10 billion yuan from its government and enterprise business.

With AAP

Related Coverage

First ZTE, now Huawei: In the age of Trump paranoia, no Chinese smartphone is safe

Do American consumers and businesses want to live in a future where our options for purchasing electronics are much more limited and expensive than the choices we enjoy today?

VPNFilter malware now targeting Asus, D-Link, Huawei, ZTE devices

Rebooting your router is no longer enough to thwart VPNFilter's brunt, Cisco Talos reports.

ZTE's business comes to a grinding halt after the US ban (CNET)

It's hard to get things done when the government stops you from getting parts from US companies for seven years.

Trump, China close to securing export deal to return ZTE to health

Reports suggest that the US government and China are close to closing a deal which could help reverse ZTE's failing fortunes.

US intelligence chiefs say Huawei, ZTE products pose national security risk (TechRepublic)

US intelligence service leaders have repeated claims of Huawei collaborating with the Chinese government since 2012, but have provided no evidence.

US FCC aims to block Chinese networking gear over national security concerns (TechRepublic)

Purchase of Huawei and ZTE networking equipment with federal funds would be blocked in the proposal by FCC Chairman Ajit Pai, which is expected to pass.