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


According to a May 10, 2018 filing with the Stock Exchange of Hong Kong (HKEX) online here, ZTE announced the April 2018 BIS Denial Order has resulted in “major operating activities of the Company have ceased”.

Earlier in April 2018, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce (Commerce) issued a Denial Order against ZTE for failing to comply with the terms of a plea deal reached in 2017 after ZTE plead guilty for illegally shipping US equipment to Iran and North Korea. One often cited plea deal was for ZTE to reprimand responsible employees and deny bonuses to those employees. However, BIS determined ZTE did pay full bonuses and kept 35 employees who violated the law.

A “Denial Order” bans American companies from exporting parts to ZTE. In the instant case, ZTE is faced with a 7-year Denial Order and can no longer receive Qualcomm Snapdragon chips (84% of all ZTE phones use Snapdragon chips) and Google Android updates.

The HKEX release further states that, “the Company maintains sufficient cash”, and ends with ZTE indicating they would seek a modification or reversal of the Denial Order and update investors as soon as possible.

It will be interesting to see the second quarter ZTE results if the Denial Order is not reversed – ZTE’s shipped 75% of their smartphone shipments to the US in the first quarter of 2018.