Bis Zte Settlement Agreement

On March 23, 2017, I signed a warrant (the “March 23, 2017 decision”) on the terms and conditions of the transaction agreement entered into in early March 2017 between the Office of Industry and Safety, U.S. Department of Commerce (“BIS”) and Zhongxing Telecommunications Equipment Corporation, Shenzhen, China (“ZTE Corporation”), and ZTE Kangxun Telecommunications Ltd., of Hi-New Shenzhen, China (“ZTE Kangxun”) (“March 2017 Settlement Agreement”) (the “March 2017” to remedy 380 violations of the Export Administration ( “regulations”), launch the printed page 34826 approved by ZTE and presented in the proposed royalty letter, attached to the March 2017 settlement agreement and included in the March 23, 2017 order. [1] The nature of recent ZTE sanctions continues to demonstrate the robust use of administrative authorities such as the denial order as powerful instruments to promote compliance with U.S. export controls, economic sanctions and comparisons with regulators. The replacement agreement also shows the significant consequences that companies that violate the terms of the transaction agreement with civil agencies, including senior executives and corporate boards, can have. A Commerce Department press release explains that the termination decision was made after ZTE fulfilled its obligations to pay a US$1 billion fine and place $400 million in trust pursuant to the repurchase agreement. These amounts are in addition to the $361 million in penalties already paid by ZTE to the BIS under the original March 2017 transaction agreement, and together these payments constitute the largest civil penalty for violations of U.S. export controls. The replacement transaction agreement also requires ZTE to consider that an external compliance coordinator, under the authority of the BIS for a period of ten years, is responsible for monitoring and respecting ZTE`s compliance. If there is evidence of further non-compliance by ZTE during this 10-year period, ZTE will lose the trust funds and BIS could activate another refusal warrant suspended for a period of 10 years.

On Thursday, June 7, 2018, U.S. Commerce Secretary Wilbur Ross announced that the government has reached a “final agreement” with Chinese telecommunications and information technology company Zhongxing Telecommunications Equipment Corporation, Shenzhen, China (“ZTE Corporation”), to amend and replace the current order of the U.S. Department of Commerce (DOC). The current refusal settlement, the Doc`s Bureau of Industry and Security (BIS) of April 15, 2018 (April 15, 2018 against ZTE Corporation and ZTE Kangxun Telecommunications Ltd. (ZTE Kangxun) (“ZTE Kangxun”) excluded ZTE from the U.S. supply chain for a period of seven years, as ZTE failed to comply with agreed conditions regarding past illegal sales of ZTE to Iran and North Korea. In June 2018, following discussions between President Trump and the Chinese government, the BIS announced a settlement agreement (previously described) anticipating the lifting of ZTE`s refusal order in exchange for additional fines and enhanced compliance measures. The BIS has also granted limited service authorizations, including the ability to continue to support existing networks and equipment and ZTE phones (as noted above), while the replacement agreement has not been respected. On June 11, the U.S. Department of Commerce`s Bureau of Industry and Security (“BIS”) issued an alternative settlement agreement with ZTE Corporation and ZTE Kangxun Telecommunications Ltd. (“ZTE”), as well as a replacement order.

The agreement replaces an agreement reached in March 2017 between the BIS and ZTE to shed light on allegations that ZTE violated the United States.