ZTE will be paying $892 million penalty towards the settlement with the U.S. government for breaking U.S. export controls and sanctions.
US found that ZTE had violated US guidelines when it exported American-made telecom products to Iran and South Korea.
ZTE was facing tough market conditions in the US because the Chinese telecom equipment maker violated US guidelines in its export markets.
As part of the resolution announced today, an additional penalty of $300,000,000 to BIS will be suspended during the seven-year term if the Chinese technology company complies with the requirements in the agreement with BIS.
“ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company,” said Zhao Xianming, chairman and CEO of ZTE Corporation.
ZTE will plead guilty to settle allegations it violated U.S. laws that restrict the sale of American-made technology to Iran and North Korea, Reuters reported.
ZTE entered into an agreement to plead guilty to conspiring to violate the International Emergency Economic Powers Act, obstruction of justice and making a material false statement, the U.S. Justice Department said.
The settlement was made with Justice, the U.S. Commerce Department and the U.S. Department of Treasury.
Between January 2010 and January 2016, ZTE directly or indirectly shipped approximately $32 million of U.S.-origin items to Iran without obtaining the proper export licenses from the U.S. government. ZTE then lied to federal investigators during the investigation when it insisted that the shipments had stopped, Justice said.
It also took actions involving 283 shipments of controlled items to North Korea, authorities said.
“Those who flout our economic sanctions and export control laws will not go unpunished,” Commerce Secretary Wilbur Ross said in a statement. “They will suffer the harshest of consequences.”
Shipped items included routers, microprocessors and servers controlled under export regulations for security, encryption and anti-terrorism reasons.
The agreement caps a year of uncertainty for the Shenzhen-based company, which in March 2016 was placed on a list of entities that U.S. suppliers could not work with without a license. ZTE acted contrary to U.S. national security or foreign policy interests, the Commerce Department said at the time.
Commerce will recommend that ZTE be removed from that list if the company lives up to its deal and a court approves its agreement with the Justice Department.
The settlement includes a $661 million penalty to Commerce; $430 million in combined criminal fines and forfeiture; and $101 million paid to the Treasury’s Office of Foreign Assets Control (OFAC). The action marks OFAC’s largest-ever settlement with a non-financial entity.
ZTE sells handset devices to U.S. mobile carriers AT&T, T-Mobile US and Sprint. It relies on U.S. companies including Qualcomm, Microsoft and Intel for components.
ZTE action plan
ZTE focuses on enhancing its procedures and controls and continues to create a strong compliance culture throughout the organization.
ZTE appointed Zhao as chairman and CEO and made major changes to the senior management team.
ZTE created a CEO-led Compliance Committee with the authority and remit to significantly change the company’s policies and procedures, and provide greater oversight of support for the compliance initiatives.
ZTE removed compliance from the responsibility of the legal department and created a separate compliance department with increased headcount to build the compliance program with full independence.
ZTE issued a new Export Control Compliance Manual created in conjunction with the review of BIS to provide more detailed guidance to the employees. ZTE also now requires an annual Compliance Commitment Agreement from all employees.
ZTE implemented a software automation tool which screens shipments from ZTE Corporation and certain subsidiaries for export control obligations.
The system is used to determine which items are subject to the Export Administration Regulations (EAR), provides embargo and restricted party screening on the transactions, and places shipments on hold that require detailed classification analysis, application of license exceptions, or application of licenses when necessary.
ZTE trained over 45,000 employees on export controls and sanctions laws and company policies in 2016.
