China’s ZTE signed preliminary agreement to lift U.S. ban

ZTE Corp has signed an agreement in principle that would lift a U.S. Commerce Department ban on buying from U.S. suppliers, allowing China’s No. 2 telecommunications equipment maker to get back into business, according to sources familiar with the matter.

ZTE ceased major operations since the seven-year ban was imposed on the company in April for breaking a 2017 agreement reached after it was caught illegally shipping goods to Iran and North Korea.

A Commerce Department spokesman said on Tuesday that “no definitive agreement has been signed by both parties.”

ZTE did not immediately respond to requests for comment.

The preliminary deal includes a $1 billion fine against ZTE plus $400 million in escrow to cover any future violations, sources said, adding that the terms were in line with Reuters reporting on the U.S. demands on Friday.

The sources requested anonymity because they were not authorized to publicly discuss the matter.

The Commerce Department plans to amend its 2017 settlement agreement and count the $361 million ZTE paid as a part of that, allowing the United States to claim a total penalty of as much as $1.7 billion, the sources said.

Over the weekend, ZTE signed the agreement drawn up by the United States, the sources said, but the amended settlement has not been signed.

ZTE’s survival has been a topic of discussion in high-level U.S.-China trade talks.

U.S. President Donald Trump planned to meet with his trade advisers on Tuesday to discuss China’s offer to import an extra $70 billion of American goods over a year as a way to defuse a potential trade war between the world’s two largest economies.

Trump tweeted last month that he told Commerce officials to find a way for ZTE to resume operations, later suggesting penalties of a $1.3 billion fine and changes to its board and top management.

As part of the deal, sources said, ZTE promised to replace its board and executive team in 30 days. It would also allow unfettered site visits to verify that U.S. components are being used as claimed by the company, and post calculations of U.S. parts in its products on a public website, they added.

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