By: Danielle Hatch
ZTE Chairman Yin Yimin released a letter in the first part of June to customers and employees promising that there would be no further compliance violations. He apologized to customers for the disruption that the violations of US export controls caused and apologized to ZTE’s 80,000 employees whose jobs were in jeopardy after ZTE was put on the US denial list and no longer had access to US technology which suspended most of the company’s operations. **An employee who asked not to be identified further confirmed Yin sent a letter but would not confirm its contents.
The US did agree to restore ZTE’s access to US components in hopes of reducing the likelihood of a prolonged escalation of tensions over tariffs.
Yimin’s letter did say that the issue will not be fully resolved until the US government approves the agreement and unspecified conditions are met. Below you will find the conditions specified by BIS.
BIS will remove ZTE from the DPL Denied Persons List after ZTE makes the required payment and deposit into escrow. Under the new agreement, ZTE must pay $1 billion and place an additional $400 million in suspended penalty money in escrow before BIS will remove ZTE from the Denied Persons List. These penalties are in addition to the $892 million in penalties ZTE has already paid to the U.S government under the March 2017 settlement agreement.Within 30 days of the date of the order, BIS will select and ZTE shall retain at its expense an independent Special Compliance Coordinator (“SCC”) to coordinate, monitor, assess, and report on compliance by ZTE and its subsidiaries and affiliates worldwide. This team of Special Compliance Coordinators will be answerable to BIS for a period of 10 years. Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws. This is the first time BIS has achieved such stringent compliance measures in any case. These collectively are the most severe penalty BIS has ever imposed on a company.
ZTE must also:
- Replace the entire board of directors and senior leadership for both entities
- Complete and submit nine audit reports of its compliance with U.S. export control laws;
Ensure that all records required to be kept or retained under the Regulations are stored in or fully accessible from the United States;
- Publish on its website all Export Control Classification Numbers as necessary to determine applicable requirements;
- Hold two public symposia in China regarding compliance with applicable U.S. export control regulations.
- Suspended Debarment: 10 years from the date of this order, unless ZTE completes the full and timely payment as described above.