ZTE Corp, China’s leading telecommunication equipment maker has signed an agreement in principle that would lift a US Commerce Department ban on buying from US suppliers, as informed from the sources.
ZTE had to cease its major operations post a seven-year ban imposed on the company in April when it breached the 2017 agreement and was caught shipping goods illegally to North Korea and Iran.
The U.S. action which was first reported earlier in March had turn devastating for ZTE as China’s second-biggest telecom equipment maker relied heavily on U.S companies such as Qualcomm and Intel for up to a third of its components.
While ZTE has refrained itself from commenting on the matter, a commerce department spokesperson has said that “no definitive agreement has been signed by both parties.”
The preliminary deal includes a US $1 billion fine against ZTE plus $400 million in escrow for events in future violations informed the sources in line with US demands on Friday.
Meanwhile, the Commerce Department is also planning to amend its settlement agreement from last year and count the US$361 million ZTE paid as a part of that, allowing the US to claim a total penalty of as much as US$1.7 billion.
US Companies presently provide 25 to 30 percent of components in ZTE’s equipment which includes smartphone and gear to build telecommunications networks. As a part of the deal agreement, ZTE has pledged to replace its board and executive team within 30 days. Moreover, the telecom component maker would also allow unfettered site visits to verify that U.S. components are being used as claimed by the company and post calculations of US parts in its products on a public website.