Reprieve for ZTE as US puts telco giant back in business

ZTE was banned in April from buying U.S. technology components for seven years

The Trump administration told lawmakers the U.S. government has reached a deal to put Chinese telecommunications company ZTE Corp back in business, a senior congressional aide said on Friday.

The deal, communicated to officials on Capitol Hill by the Commerce Department, requires ZTE to pay a substantial fine, place U.S. compliance officers at the company and change its management team, the aide said.

The Commerce Department would then lift an order preventing ZTE from buying U.S. products.

ZTE was banned in April from buying U.S. technology components for seven years for breaking an agreement reached after it violated U.S. sanctions against Iran and North Korea.

The Commerce Department decision would allow it to resume business with U.S. companies, including chipmaker Qualcomm Inc.

U.S. president Donald Trump last week floated a plan to fine ZTE up to US$1.3 billion and shake up its management as his administration considered rolling back more severe penalties that have crippled the company.

The White House did not immediately confirm reports of the latest deal.

Trump's proposal earlier in the week ran into resistance in U.S. Congress, where Democrats and Trump's fellow Republicans accused the president of bending to pressure from Beijing to ease up on a company that has admitted to violating sanctions on Iran.

After the latest report, Republican Senator Marco Rubio tweeted, "Yes they have a deal in mind. It is a great deal... for #ZTE & China. #China crushes U.S. companies with no mercy & they use these telecom companies to spy & steal from us."

Rubio, as well as Democratic Senators Chuck Schumer and Chris Van Hollen, said Congress should act to stop Trump from letting ZTE get back into business.

Chinese officials sought a pullback on ZTE as part of any broader deal to prevent a trade war between the world's two biggest economies. U.S. Commerce Secretary Wilbur Ross is scheduled to visit China next week for another round of talks.

ZTE needs U.S. components for its mobile phones and network equipment. U.S. companies provide an estimated 25 per cent to 30 per cent of components in ZTE's equipment.

ZTE, which is publicly traded but whose largest shareholder is a Chinese state-owned enterprise, agreed last year to pay a nearly US$900 million penalty and open its books to a U.S. monitor for breaking a 2017 agreement after it was caught illegally shipping U.S. goods to Iran and North Korea, in an investigation dating to the Obama administration.

As part of that agreement ZTE dismissed four senior employees.

(Reporting by Roberta Rampton and Doina Chiacu; Writing by Chris Sanders; Editing by Jonathan Oatis and Meredith Mazzilli)

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