Commerce Secretary: US reaches deal with China's ZTE

Commerce Secretary: US reaches deal with China's ZTE

Commerce Secretary: US reaches deal with China's ZTE

The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE stay in business in exchange for paying an additional $1 billion in fines and agreeing to let US regulators monitor its operations.

Trump has indicated he views the handling of ZTE as part of his administration's broader effort to renegotiate trade conditions with China. The maintaining its 10-year export ban on ZTE, but the ban is indefinitely suspended and is likely to remain suspended if ZTE complies with the U.S. trade laws.

The ban on ZTE became a key focus in crunch trade talks between Washington and Beijing, and a deal to lift it was struck as U.S. President Donald Trump seeks trade concessions from China and negotiations continue to avoid a trade war between the world's two largest economies.

Commerce Secretary Wilbur Ross told CNBC this morning that the USA has struck a deal to lift sanctions on the electronics giant.

The tentative deal we have learned about today via Reuters, calls out a $1billion fine for the original breach of the April 2017 agreement to not sell to North Korea and Iran plus an additional $400 million in escrow to cover any future violations.

Ross said on Thursday the penalty is the largest the Commerce Department has ever levied.

ZTE did not immediately respond to requests for comment on Thursday. Their function will be to monitor on a real-time basis ZTE's compliance with USA export control laws.

ZTE was originally posted on to the Denied Persons List in April 2018, when it was announced that the U.S. had banned the company from purchasing parts from USA companies, such as Alphabet's (NASDAQ:GOOG) Google and Qualcomm (NASDAQ:QCOM).

In April, the Commerce Department blocked ZTE from importing American components for seven years, having concluded that it had deceived US regulators after it settled charges last year of violating sanctions that were imposed against Iran and North Korea. That left a US deficit of more than $375 billion.

Back in April, the United States government announced a complete and total ban of any U.S. components manufacturers from selling to Chinese telecom and handset giant, ZTE (HKG:0763).

US goods exported to China past year totaled $130 billion while Chinese imports to the USA totaled $506 billion.

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.

Shares of Qualcomm Inc rose 2 percent to $61.255, while NXP jumped 6.2 percent to $121.60.

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