ZTE must pay up to $1.4 billion, replace its entire board of directors and senior leadership, and submit to a decade of embedded U.S. trade monitors in order to resume receiving exports from U.S. tech companies, in what the Department of Commerce is calling its “strictest … compliance restrictions ever.”
The U.S. Department of Commerce said that ZTE has agreed to the additional penalties and compliance measures so that the export ban on the company will be lifted. That seven-year ban was imposed by the department’s Bureau of Industry and Security in March, after the vendor allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea. In early May, ZTE said it had ceased its major operating activities due to the export ban.
The new deal largely follows the terms which was previously reported: ZTE has to pay $1 billion in fines and put another $400 million in escrow for “suspended penalty money,” in addition to $892 million that it has already paid under the March agreement, according to the Commerce department.
ZTE is also required to hire a team of “special compliance coordinators” that will be chosen by BIS and answerable to the U.S. agency, not ZTE. For 10 years, those compliance coordinators will “monitor on a real-time basis ZTE’s compliance with U.S. export control laws,” according to the Commerce Department, adding that embedding such personnel with the company means that it will be able to identify and respond to violations faster.
“This is the first time BIS has achieved such stringent compliance measures in any case,” the Commerce Department added. In addition, the agreement puts in place a suspended export ban that can be immediately activated by BIS if ZTE commits any additional violations of U.S. trade rules during that decade of monitoring.
“These collectively are the most severe penalty BIS has ever imposed on a company,” Commerce said in press release on the agreement.
“Today, BIS is imposing the largest penalty it has ever levied and requiring that ZTE adopt unprecedented compliance measures,” said Commerce Secretary Wilbur Ross in a statement. “We will closely monitor ZTE’s behavior. If they commit any further violations, we would again be able to deny them access to U.S. technology as well as collect the additional $400 million in escrow. The first settlement with ZTE set a record for civil and criminal penalties in an export control case. This new settlement agreement sets another record, and brings the total penalties assessed on ZTE to $2.29 billion.”
The Commerce Department added that the purpose of the settlement terms is to “modify ZTE’s behavior while setting a new precedent for monitoring to assure compliance with U.S. law.”
