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On June 7, 2018, Commerce Secretary Wilbur Ross announced that Chinese Telecommunications companies, Zhongxing Telecommunications Equipment Corporation of Shenzen, China and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (collectively “ZTE”) have agreed to pay $1 billion and place an additional $400 million in suspended penalty money in escrow in order to be removed from the Denied Persons List.  This penalty payment is in addition to the over $850 million in penalties that ZTE already previously paid to multiple U.S. government agencies in March of 2017 when it first entered into a settlement agreement arising out of its illegal re-exportation of controlled U.S. origin telecommunications equipment to Iran and other prohibited destinations.

As previously reported, the U.S. Department of Commerce announced in April 2018 that it had activated the suspended denial order against ZTE when it determined that ZTE had violated its 2017 settlement agreement.  President Trump then announced in May 2018 that he had instructed the Department of Commerce to work with ZTE in order to get them “back into business.”

As part of the settlement agreement, ZTE will also be required to retain a team of compliance coordinators selected by and accountable to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) for a probationary period of 10 years.  ZTE will also be required to replace its entire board of directors and senior leadership.

Secretary Ross indicated that “BIS is imposing the largest penalty it has ever levied and [is] requiring ZTE to adopt unprecedented compliance measures.  An effective date for the lifting of export restrictions against ZTE is still forthcoming.

For more information on export controls, please contact Cortney Morgan, Linda Tiller, or Grant Leach.