ZTE and Commerce sign escrow agreement – denial ban is one step closer to being lifted.

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Earlier today, the U.S. Department of Commerce announced they had reached an escrow agreement with ZTE. As you are aware, in order to lift the denial ban put in place in April 2018 (and be authorized to purchase goods and services from US companies), ZTE must pay $1 billion dollar fine and place $400 million into an escrow account.

Commerce announced today an agreement was reached with ZTE. The next step is for ZTE to deposit the $400 million into the escrow account. Upon deposit, the Department of Commerce, Bureau of Industry and Security will lift the denial ban. According to the June 8, 2018 superseding order, ZTE has until September 8, 2018 to deposit the funds – based on today’s news it appears ZTE is on its way to lifting the denial ban.

If you are a supplier or ZTE vendor and have any questions about the denial ban, feel free to contact export compliance attorney, David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

Check out my other ZTE posts:

ZTE Open for US Business – sort of and only until August 1, 2018.

ZTE deal is good to go – House bill does not include Senate language “undoing” ZTE deal.

ZTE pays $1 billion fine, $400k into escrow soon.

In-depth details of the ZTE deal.

Senate passes amendment to undo Trump’s ZTE deal.

Deal reached between the US and ZTE

ZTE facing $1.7 billion penalty?

The real reason Trump is working to reverse the 7 year ZTE ban? To help U.S. companies!

CNBC reports the US and ZTE are working on alternatives to the denial order issued against ZTE back in April of this year.

ZTE estimated to lose $3.1 billion due to US sanctions (Bloomberg).

Deal reached to allow ZTE to purchase U.S. hardware and software?

 

ZTE Open for US Business – sort of and only until August 1, 2018.

According to the US Department of Commerce, Bureau of Industry and Security (BIS) website, ZTE has authorization by BIS for “Limited Service” from July 3rd – August 1st, 2018.

On July 3rd, BIS granted a limited authorization for all persons to engage in business with ZTE under the 4 following circumstances:

  1. Engagement with ZTE for all contracts entered into with ZTE before April 15, 2018.
  2. Engaging in the support, service, software updates and patches to ZTE phones.
  3. Disclosure to ZTE of information regarding security vulnerabilities in items owned, possessed or controlled by ZTE.
  4. Limited transfer of funds – can make or receive payments to and from ZTE if transactions are pursuant to this authorization.

The full text can be found here.

Any other transactions with ZTE are still subject to the denial order of April 15, 2018. The denial order is only lifted once ZTE pays the $400,000 into an escrow account. According to the superseding order that outlines the ZTE deal, ZTE has 90 days to pay the escrow funds (until September 6, 2018).

Check out my other ZTE-related blog posts:

ZTE deal is good to go – House bill does not include Senate language “undoing” ZTE deal.

In-depth details of the ZTE deal.

Senate passes amendment to undo Trump’s ZTE deal.

Deal reached between the US and ZTE.

ZTE facing $1.7 billion penalty?

The real reason Trump is working to reverse the 7 year ZTE ban? To help U.S. companies!

CNBC reports the US and ZTE are working on alternatives to the denial order issued against ZTE back in April of this year.

ZTE estimated to lose $3.1 billion due to US sanctions (Bloomberg).

Deal reached to allow ZTE to purchase U.S. hardware and software?

ZTE may need to change management and board in order to access US suppliers.

ZTE report to the HKEX on the impact of the US denial order: “major operating activities of the Company have ceased”.

ZTE and Huawei banned for sale to US military personnel.

ZTE banned from purchasing US technology for 7 years.

If you have any questions whether your company can start engaging with ZTE, call trade specialist David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

ZTE deal is good to go – House bill does not include Senate language “undoing” ZTE deal.

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Last Thursday, the US House of Representatives (“House”) passed its version of the defense appropriations bill, formally known as the the “John McCain National Defense Authorization Act for Fiscal Year 2019”, or “NDAA” for short.

The House bill passed on a 359-49 vote and authorized $675 billion in defense spending for next year. The final bill does include the Senate language prohibiting ZTE and Huawei from selling goods or services to the Pentagon.

More importantly, the final bill does not include Senate language that would have “undone” ZTE’s deal ($1 billion in fines, US government oversight, $400k in escrow, etc.) Despite bipartisan support in the Senate for amended language that would have prevented a deal with ZTE, the House did the right thing and removed this amendment from the final bill.

News of this final bill probably won’t make it to the news outlets, but this final bill is a win for President Trump and the administration – and will be the first time the US Government has had oversight of a large Chinese company.

With the ZTE deal saved and ZTE now eligible to buy hardware and software from US companies – companies such as Qualcomm, Lumentum, Oclaro, Broadcom, Intel, MACOM, Semtech, and other U.S.-based vendors in the ZTE supply chair are probably breathing a sigh of relief.

Check back for more ZTE news, if you have any questions about ZTE, trade or customs law, contact David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

Deal reached between the US and ZTE.

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Credit: Courtesy of ZTE Corporation

The US will end the ban on ZTE buying American software and hardware.

The terms of the deal require:
1. $1 billion penalty;
2. $400 million in escrow to be forfeited in the event of future export violations during the 10-year probationary period;
3. Compliance team in ZTE that will report to the company’s new chairman;
4. ZTE must change board and management team in 30 days.

Various online articles covering the US/ZTE deal ask what the US gets out of the ZTE deal.

None of the news sources mention that this deal saves ZTE and will lead to business for US suppliers of components and software to ZTE:

-Acacia Communications Inc
-Oclaro,
-Lumentum Holdings,
-FiberHome
-NeoPhotonics Corp
-Inphi Corp
-Finisar Corp
-Analog Devices Inc
-Xilinx Inc
-Qualcomm
-Qorvo Inc.
-Alphabet Inc

If you or anyone you know has questions about the ZTE deal or export compliance questions, feel free to contact experienced trade attorney, David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

ZTE facing $1.7 billion penalty?

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Reuters reports the Trump administration may seek a penalty up to $1.7 billion from ZTE. In addition to the hefty fine, the U.S. Department of Commerce is also seeking unrestricted access to sites to verify US components are being used as claimed by ZTE.

As previously mentioned on this blog, ZTE is banned from purchasing from US hardware and software suppliers for 7 years due to violating U.S. export controls. This ban would severely limit ZTE’s ability to make phones as US companies provide 25-30% of the components in ZTE equipment, with ZTE paying over $2.3 billion to US suppliers.

As the penalty can change anytime – check back for more updates.

 

 

U.S. Commerce Secretary in China for trade talks.

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According to an Associated Press article from June 1st, U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday for talks on China’s promise to buy more American goods.

The talks are about China’s May 19th announcement to narrow the trade surplus with the US, which reached a record high of $375 billion USD last year. China previously indicated they would increase purchase of farm goods, energy and other goods and services.

Additionally, the US may not get the commitment it seeks in reducing the trade deficit as China’s “Made in China 2025” plan seeks to establish China as an industry leader in high tech industries such as robotics, computer chips and electric vehicles.

A resolution may not occur with just one meeting as Trump has threatened tariffs on $100 billion of Chinese goods and China threatening retaliatory tariffs on $50 billion of US goods.

Check back for the latest news of the results of the Secretary Ross meeting.

If you have any questions about current antidumping or countervailing duty actions on goods from China – feel free to call experienced trade attorney, David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

It’s official – US issues trade tariffs on steel and aluminum from the EU, Canada and Mexico.

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The Whitehouse issued two presidential proclamations that placed 25% steel and 10% aluminum tariffs on imports from the European Union, Canada and Mexico.

The full proclamations can be found here for steel and here for aluiminum.

If you have any questions on how these new tariffs will impact your business or what options you may have – contact experienced antidumping attorney David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com for a free evaluation.

Section 301 Duties to be announced by June 15, 2018.

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According to a Whitehouse.gov statement released today (May 29, 2018) titled: “Statement on Steps to Protect Domestic Technology and Intellectual Property from China’s Discriminatory and Burdensome Trade Practices” found here, the US will impose a 25% tariff on $50 billion of goods imported from China “containing industrially significant technology, including those related to the “Made in China 2025” program.  The final list of covered imports will be announced by June 15, 2018, and tariffs will be imposed on those imports shortly thereafter.

What is the “Made in China 2025” Program?
Made in China 2025 (Chinese: 中国制造2025) is a plan issued by Chinese Premier Li Keqiang in May 2015 to make China more self-sufficient and a manufacturing superpower in high-tech industries. An English version of the initiative can be found here.

What is Section 301?
Section 301 of the U.S. Trade Act of 1974, authorizes the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce.

Section 301 is worded in general terms and allows for broad discretion from the President.

What are other points mentioned in the press release?

  1. There will also be other restrictions and increased export controls for Chinese persons and entities and will be announced on June 30, 2018.
  2. The US will continue litigating in the WTO for violations of intellectual property against China related to licensing of intellectual property. The US filed the case with the TWO on March 23, 2018.

Check back here on June 15, 2018 for the final list and tariff amounts to be imposed on the goods from China. If you have any questions how these Section 301 tariffs will impact your business, contact David Hsu at 832-896-6288 or by email at dhsu@givensjohnston.com.

No US-Rwanda Trade War Updates

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Flag of Rwanda via Wikipedia

A few days ago I posed about a pending US-Rwanda trade war over Rwanda’s import duty on second hand clothes imported into Rwanda.

My post mentioned a May 28th deadline in which the US asked Rwanda to reverse or reduce tariffs on imports of secondhand clothing – as of today, there has been no news. Yesterday (Monday, May 28th) was Memorial Day in the US, so a decision will likely be made some time this week.

US-Rwanda trade war?

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Flag of Rwanda via Wikipedia

Unexpected title I know, usually we associate “trade war” with “China”, however, the Trump administration has given Rwanda until May 28th to reduce the tax on imported clothes (the US is a major exporter of second hand clothes to Rwanda – ever wonder what happens to those “clothes and shoes” that are donated to the parking lot donation boxes?)

Background:
In 2016, the East African Community (EAC) composed of Kenya, Tanzania, Rwanda and Uganda increased tariffs on used clothing. Specifically, Rwanda increased the duties by 20 cents to $2.50 per kilogram. This 20 cent increase is at risk of hurting Rwanda’s export benefits under the US African Growth and Opportunity Act (AGOA). The AGOA allows certain African countries (like Rwanda) duty-free access to the US market for 6,500 exported products. Since AGOA was passed, duty-free exports to the US from AGOA qualified countries have increased 400% to over 1.0 billion since the law was passed.

AGOA Products:
A full list of those products can be found here.

The Trump administration is threatening Rwanda with losing certain benefits under the AGOA after a compliant was filed last year from the Secondary Materials and Recycled Textiles Association (SMART), a US-based organization which represents companies that collect and resell Americans’ used clothing. SMART claims the Rwanda tariffs have a big impact on the $1 billion dollar used clothing export industry.

Arguments from both sides:
SMART claims the Rwandan tariffs hurt their business while poor Rwandans also claim the increased prices of second hand clothes in Rwanda impact their ability to buy clothes at affordable prices. However, Rwanda’s government claims an increase in second-hand clothing prices will make locally made Rwanda clothes more price competitive. If the tariffs increase second-hand clothing prices and move people towards purchasing new Rwandan made clothes, the Rwandan government claims more factories will be built, more jobs will be created and the economy will improve.

What will happen?
Check back on May 28th, I will update as soon as I find anything. If anything, I’m expecting China to fill the void. A cursory search on Alibaba for “used clothes in bales” shows lots of offerings targeted for export to East Africa and the general African market.