ZTE agrees to ‘strictest’ US Commerce settlement to finally get back into business

It wasn’t exactly a blazing fast process, costing ZTE billions as the Chinese multinational telecommunications equipment and systems company essentially had to shut down operations for the better part of two months, but you can probably expect phones like the Android Go-powered Tempo Go to be back in stock soon enough.

In line with recent speculation, the tech giant agreed to what Commerce Secretary Wilbur Ross aptly labeled as “the strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”

Said “violator” needs to pay a penalty of a whopping $1 billion up front, also being required to put an additional $400 million in escrow as collateral for any prospective future breaches of trade laws.

The Trump Administration still retains “the power to shut them down again” as well, and perhaps most important of all, a “compliance department” of the US Commerce’s choosing will “literally be embedded into the company to monitor it going forward.”

That basically means ZTE’s entire board of directors and executive management will be out in no more than 30 days, with a US-selected replacement roster set to report to an unnamed new chairman, and the Chinese company itself having to handle the financial compensation of this “compliance team.”

In addition to making absolutely sure ZTE never deals with embargoed Iranian or North Korean companies again, the harsh settlement officially lifting the April ban should also “serve as a very good deterrent” for “other potential bad actors”, according to Wilbur Ross.

It remains to be seen how fast and how well ZTE can recover from multi-billion dollar losses, not to mention far-reaching, hard to quantify damage to the company’s reputation and brand image.

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About The Author
Adrian Diaconescu
Adrian has had an insatiable passion for writing since he was in school and found himself writing philosophical essays about the meaning of life and the differences between light and dark beer. Later, he realized this was pretty much his only marketable skill, so he first created a personal blog (in Romanian) and then discovered his true calling, which is writing about all things tech (in English).