ZTE's settlement has dealt a sizable financial blow to the company, and may affect its output as well as the companies from which it sources components for upcoming devices.
ZTE has agreed to settle with the United States government to the tune of $892 million for violating laws that prohibit the sale of American technology to Iran, officials announced Tuesday. According to the U.S. Justice Department, the Chinese mobile giant shipped $32 million worth of equipment that incorporated prohibited components to the country between 2010 and 2016 without authorization, and lied to investigators when it asserted that it had stopped the dealings.
In addition to the unprecedented fine, ZTE will also be subject to a seven-year, $300 million suspended penalty, due immediately should the company commit any further wrongdoing. ZTE has also agreed to ongoing, routine monitoring and auditing, and will remain on a list of companies U.S. suppliers are forbidden from doing business with without government approval. The company was initially placed on that list in March 2016, but can be removed in time if it fully cooperates, according to Reuters.
“With this action, we are putting the world on notice: Improper trade games are over with,” said U.S. Secretary of Commerce Wilbur Ross in a statement. “Those who flout our economic sanctions, export control laws, and any other trade regimes, will not go unpunished.”
The Shenzhen-based firm, the fourth-largest phone vendor in the U.S. behind Apple, Samsung, and LG, reached the settlement with the Departments of Justice, Commerce, and Treasury. ZTE will plead guilty to conspiracy to unlawfully export, obstruction of justice, and making false statements to federal investigators, officials say. The announcement marks the end of a years-long saga for the embattled company, which receives reportedly a third of its components from American entities, including Qualcomm, Intel, and Microsoft.
“ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company,” said ZTE Chairman and CEO Zhao Xianming, who was promoted to the leadership positions in April 2016 with a promise to tighten the company’s export control. “We have learned many lessons from this experience and will continue on our path of becoming a model for export compliance and management excellence,” the statement reads.
To that end, ZTE’s new Chief Export Compliance Officer, U.S.-based lawyer Matt Bell, added that the company is building a “global team” of compliance professionals, restructuring its legal department, and instituting new policies, training, and automated tools to keep current with ever-changing regulations.
The terms of the settlement are still awaiting court approval. Of the $892 million total, $101 million will be paid to the Treasury’s Office of Foreign Assets Control, representing the office’s largest settlement in history with a non-financial firm, according to Reuters.