U.S. Looks to Claim $1.7 Billion Penalty from China

Penalty from China

The Trump administration has taken on a variety of issues relating to foreign policy in the past two years. One particular Chinese company has been at the forefront of efforts to tighten the loopholes of proprietary information of various companies, but also to bring consequences for breaking the sanctions and agreements related to Iran and North Korea.

ZTE Corp, China’s number two telecommunications equipment maker, has been crippled by a ban that was imposed starting in April for buying U.S. technology components for seven years for breaking an agreement reached after it was caught illegally shipping goods to Iran and North Korea.

The U.S. Commerce Department is also seeking unfettered site visits to verify U.S. components are being used as ZTE claims they are. The department is also seeking a requirement that the ZTE post calculations of the U.S. components in its products on a website.

The negotiations with the company come at the same time that U.S. Commerce Secretary Wilbur Ross travels to Beijing for trade talks with the Chinese government.

The company is hoping to avoid this scenario, because the initial 7-year ban would have a larger negative impact in multiple ways. In addition to the fine, the U.S. is also requesting that the ZTE replace its board of directors, executive team, and hire a compliance contractor to oversee the company’s operations. They would want all this done within a 30-day time period.

Various sources have indicated that ZTE’s failure to comply was due to faults in its internal controls, and was not part of a plan of systematic deception. They have also requested a stay of the order that bars American suppliers from selling to ZTE.

ZTE has already paid a penalty to the U.S. of $1.2 billion in March 2017, but the penalties for ZTE are fluid, as the trade talks between China and the United States are ongoing.

Many of these issues for the ZTE come as the Trump administration is ramping up its efforts to curtail the influence and reach of the Iranian regime. One of the biggest issues is limiting its economic opportunities through sanctions. Companies, such as ZTE, run the risk of losing access to the U.S. financial systems, as well as the U.S. consumer market.

In light of the U.S. pulling out of the Joint Comprehensive Plan of Action (JCPOA), many companies are scaling back plans to invest in Iran or simply pulling out altogether.

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