ZTE hands over a billion bucks to settle US export sanctions violations

Chinese kit vendor ZTE has settled with US authorities to the tune of over a billion dollars as a result of violating trade sanctions with Iran and North Korea.

Telecoms.com first reported on this exactly a year ago, following a Reuters report. The news agency noted ZTE was accused of enabling the shipment of some US-made telecoms kit to Iran, in spite of a US embargo on doing just that. Reuters had first reported on the matter back in 2012.

As a result ZTE was threatened with a trade embargo by the US, causing the Chinese government to openly pout about America throwing its weight around and make vague threats about damage to Sino-US relations that seem especially trivial given US political developments since then. Soon after ZTE’s CEO fell on his sword which, in hindsight, was just the start of the damage limitation exercise.

What we didn’t know at the time was that ZTE, apparently not happy with merely antagonising the US over Iran, thought it might as well get involved with North Korea too. Regardless of Chinese government complaints this was clearly not wise behaviour for any company wishing to do business with the US.

The excellently-named US Secretary of Commerce – Wilbur L. Ross, Jr. – announced ZTE will hand over a grand total of $1.19 billion, with $300 mil of it suspended so long as ZTE behaves itself from now on, as a please bargain following ZTE’s decision to own-up and be monitored to make sure it’s not naughty again. Bizarrely, the settlement is being positioned as a win for President Trump’s brand of nationalist populism, despite the transgressions and investigation having taken place before he was in office.

“We are putting the world on notice: the games are over,” said Ross. “Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.”

“The results of this investigation and the unprecedented penalty reflects ZTE’s egregious scheme to evade U.S. law and systematically mislead investigators. This penalty is an example of the extraordinary powers the Department of Commerce will use to vigorously protect the interests of the United States.”

ZTE’s contrition was absolute. “ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company,” said Dr. Zhao Xianming, Chairman and CEO of ZTE. “Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company. We have learned many lessons from this experience and will continue on our path of becoming a model for export compliance and management excellence. We are committed to a new ZTE, compliant, healthy and trustworthy.”

The ZTE press release then detailed an exhaustive list of measures it has undertaken, most of which featured the term ‘compliance’. The resulting impression is of a company with its tail completely between its legs, prostrating itself at the mercy of US authorities. The release was keen to stress that things should return to normal as a result of the settlement, which was probably a billion well spent.

It’s hard to imagine the Chinese authorities are at all happy about this, not least because it serves to illustrate how much power the US still holds in global trade and gives Trump an early victory to claim as his own. We wouldn’t be at all surprised to see a US tech champion given a hard time in China before long.

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