Trade war: USA reaches deal with Chinas phone maker ZTE Corp

Posted June 11, 2018

"This issue reflects problems that exist with our firm's compliance culture and at management level", Yin wrote, according to the source, adding the incident was caused by the mistakes of a few ZTE leaders and employees.

ZTE, headquartered in the southern city of Shenzhen, declined to comment on the report.

The US reached a deal to allow ZTE Corp to get back in business after the Chinese telecommunications company pays a record-large fine and agrees to management changes, eliminating a key sticking point as the two countries try to avert a trade war.

Commerce had imposed a seven-year ban on ZTE doing business in the U.S.in April as part of a package of penalties levied after the company sold American-made products to Iran, a violation of USA sanctions.

Although the company dismissed four senior officials for their part in the scandal and installed a compliance team and new procedures at a cost of more than $50 million, it did not discipline a further 35 staff involved - a failure which prompted the U.S. government's action.

The decision amounted to a death sentence to ZTE, which relies on US parts and which announced that it was halting operations.

President Donald Trump has drawn fire from Congress for intervening in the case to rescue a Chinese company that had violated US sanctions against two rogue nations that have been pursuing nuclear weapons programs.

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

Chinese anti-monopoly regulators have withheld approval of Qualcomm Inc.'s proposed acquisition of NXP Semiconductors, which some commentators say is being used as leverage against Washington.

Trump appeared to confirm that a deal had been reached in a tweet on May 25, but subsequent broader U.S. trade talks in Beijing on USA tariffs on aluminium and steel ended inconclusively with no mention of the ZTE matter.

However, they said the settlement might reduce the likelihood of a prolonged escalation of tensions.

It crippled the company, which shut down major operations and left it unlikely to survive - until President Donald Trump got involved. "It's unprecedented to have USA agents as monitors".

ZTE must "always adhere to the bottom line of compliance", the letter was quoted as saying.

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 past year, while 30 per cent of Acacia's total revenue was from ZTE.