Sanctions On ZTE Corp. May Be Modified

Reports have emerged that the Commerce Department may be close to lifting its recent ban prohibiting U.S. companies from selling material to ZTE Corp., China’s second-largest telecommunications firm. The specifics of the deal have not yet been finalized. People familiar with the agreement outline have cautioned the talks between U.S. and Chinese leaders remain extremely fluid and it remains unclear how quickly a resolution could be reached.

The embattled Chinese company had been slapped with severe regulatory restrictions after it was found to be selling phones containing U.S. components to North Korea and Iran. It was then found to have misled U.S. investigators about its behavior. ZTE is partly owned by the Chinese government. Given its importance to the Chinese tech sector, Chinese leader Xi Jinping personally asked Trump to intercede.

Currently, U.S. companies are prohibited from selling their materials to ZTE. That move was widely seen in the United States and China as an insurmountable hurdle that would have resulted in the closure of the company. Now, the Commerce Department is debating replacing the ban with other requirements. According to Larry, Trump’s top economic adviser, any potential deal could include things like “significant fines, very severe compliance measures, a new board of directors, a new management team.”

Trump has directed Commerce Secretary Wilbur Ross to make changes to help the company. However, Kudlow said that ZTE wouldn’t get off “scot-free” from their multiple violations of US law. Treasury Secretary Steven Mnuchin commented, “The objective was not to put ZTE out of business. The objective was to make sure they abide by our sanctions programs.”

Trump has spent the past several months trying to get China to reduce its trade surplus with the United States. A variety of tariffs on Chinese products has been proposed, a move that angered Chinese leaders. Chinese vice premier Liu He met with Treasury Secretary Steven Mnuchin and other White House officials last week to try to hammer out a deal that would lead to a $200 billion reduction in the trade deficit between both countries. A deal has not yet been reached.

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