ZTE has agreed to pay combined fines totaling $1.19 billion, and to plead guilty to violation charges after the US Department of Commerce determined the company knowingly skirted US sanctions against Iran and North Korea and tried to hide illicit activity.
ZTE will no doubt feel the pinch if these fines are approved by the courts, as the Chinese company has found itself marred in scandal. At the center of this stand allegations that ZTE re-exported IT equipment and supplies to Iran and North Korea. It gained hundreds of millions of dollars on those deals and broke the US embargo on Iran between 2010 and 2016. At the same time, the company actively tried to mislead investigators, claimed it stopped such practices back in 2012, and even formed an internal task force in January of last year tasked with destroying evidence.
Though the company will pay a high price for its transgressions this isn’t the worst case scenario. US authorities threatened to completely cut off ZTE from any American suppliers, leaving the company stranded. However, that option would have likely triggered a response from the Chinese government, essentially starting a trade war between the two countries. It’s clear both sides wanted to avoid such an outcome.
Instead, ZTE will also be under probation for three years with independent monitors verifying the company’s exports. It will also be under probation for a seven year period for civil charges, forfeiting $300 million if it’s found the company doesn’t follow the law during that time.