Commerce Secretary Wilbur Ross said a deal the Administration has reached with China’s ZTE to restore its U.S. trading rights includes creating a new compliance department that’s staffed with American compliance officers.
Under the deal, ZTE would also pay a fine up to $1.3 billion and change its current management team.
Ross said Thursday during an appearance on CNBC the plan “literally would involve . . . implanting people of our choosing into the company to constitute a compliance unit … [which] would report back to the Department of Commerce.”
In April, the Commerce Department hit ZTE — China’s biggest listed telecommunications equipment maker — with a seven-year “denial of export privileges.”
The export denial barred American companies from selling components to Shenzhen-based ZTE.
Before the ban, ZTE depended on American companies for parts used in its networking gear and smartphones. San Diego-based chipmaker Qualcomm was a primary ZTE supplier.
April’s export ban came after ZTE admitted that two letters it sent to the U.S. government about its compliance with the terms of the 2017 settlement contained false statements.
In the earlier case, U.S. authorities alleged in civil and criminal charges that ZTE illegally shipped telecommunications equipment to Iran and North Korea. ZTE was also charged with obstruction for making false statements and destroying export records.
ZTE paid $1.19 billion in penalties to settle the 2017 case and promised to fire four senior employees and discipline 35 others by reducing their bonuses or reprimanding them.
In April, the Commerce Department said ZTE hadn’t disciplined the 35 employees. Instead it “paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.”
ZTE reportedly replaced its chief compliance officer in March this year.
The South China Morning Post said ZTE removed Cheng Gang, a senior vice-president, from his roles as chief compliance officer and chief legal officer.
Cheng, the former compliance chief was replaced by Wang Dong, “who was appointed to the rank of senior vice-president, according to the memo,” the SCMP said.
“It is unclear whether Cheng remains an employee at ZTE,” the paper said.
ZTE has 80,000 employees.
Several members of the U.S. Congress have said they oppose on national security grounds any new deal that restores ZTE’s U.S. trade privileges.
Richard L. Cassin is the publisher and editor of the FCPA Blog.