China accepts US$1.2bn penalty on ZTE

Despite fragile relations between the US and China since Donald Trump took office, there has been little evidence of Chinese protests since the country’s telecoms giant ZTE Corp was fined nearly US$1.2bn by the US Department of Justice (DoJ).

Earlier this month ZTE was found guilty of breaking US sanctions by shipping US-made equipment to Iran and North Korea and to the latter country without the correct export licences.

The group’s most senior levels of management approved the scheme, under which a total of US$32m worth of US-made goods was sent to Iran between 2010 and 2016. The equipment included routers, microprocessors and servers controlled under export regulations for “security, encryption… and/or anti-terrorism reasons”. ZTE also made 283 shipments of mobile phones to North Korea.

The DoJ judged that ZTE lied to authorities and its own lawyer about the violations. It imposed a US$892m (£740m) penalty plus a further US$300m which will be suspended for seven years and depends on the group meeting certain conditions.

“With this action, we are putting the world on notice. Improper trade games are over with,” said Wilbur Ross, secretary of commerce in the Trump administration. He said that Shenzhen-based ZTE had shown a “brazen disregard of our laws as insulting as it was dangerous”.

US attorney general Jeff Sessions commented: “ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s – they lied to federal investigators and even deceived their own counsel and internal investigators about their illegal acts.

“This plea agreement holds them accountable, and makes clear that our government will use every tool we have to punish companies who would violate our laws, obstruct justice and jeopardise our national security.”

By contrast, the response of the Chinese authorities has been muted. Questioned by reporters, Wang Yi, China’s minister of foreign affairs, said only: “I want to tell you that the Chinese government has always opposed unilateral sanctions. But we always ask Chinese companies to obey the laws of the countries they are doing business in.”

There has been little to no coverage of the ZTE penalty in the Chinese press, suggesting that the media has been told to steer clear of the issue. Yet newspapers have previously described the treatment of ZTE as part of the US’s long-running efforts to prevent China’s firms from establishing a presence in the American telecom market.

ZTE’s own response was to admit its wrongdoing. “ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company,” said the group’s chairman and chief executive officer (CEO), Zhao Xianming. “Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company.”

The penalty came ahead of US secretary of state, Rex Tillerson’s two-day visit to China and Chinese president Xi Jinping’s scheduled trip to the US to meet president Trump early next month.

 

 

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