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11/21/2024 12:17:48 pm

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ZTE Pleads Guilty in Illegal Export case, Agrees to pay Record Fine

ZTE Pleads Guilty in Illegal Export case.

(Photo : Getty Images. ) China’s telecom giant ZTE Corp has pleaded guilty in the illegal export case. It has also agreed to pay a record fine of $1.19 billion to the U.S government.

China's telecom giant ZTE Corp has finally reached a settlement with the U.S authorities in the illegal shipment case by pleading guilty and agreeing to pay a hefty fine. The settlement, which is likely to cause damage to ZTE's international reputation, almost marks the closure of high profile case that dragged for nearly four years.

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The Chinese telecom equipment manufacturer has agreed to pay record $1.19 billion in fine, out of which $892 million constitutes as criminal and civil penalty and $300 million as an additional penalty, according to a statement issued by the United States Department of Commerce.

The case that came into limelight in 2012 accused ZTE of secretly exporting millions of dollars of software and hardware products of some of best known U.S companies to North Korea and Iran, which are two countries that are considered amongst the most hostile towards the U.S regime.

"ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran's, they lied ... about their illegal acts," U.S. Attorney General Jeff Sessions said in a statement.

The verdict will come as handy for the new Trump administration that is currently engaged in promoting its much criticized protectionist policies, which has got most economies across the world worrying.

Not surprisingly, the U.S Secretary of Commerce Wilbur Ross's comment on ZTE's judgement clearly echoed Trump's protectionist views. He said: "Those who flout our economic sanctions and export control laws will not go unpunished - they will suffer the harshest of consequences."

ZTE Acknowledges Mistake and goes for Management Reshuffle

Meanwhile, a clearly embarrassed and beleaguered ZTE chairman, Zhao Xianming, publicly accepted the grave mistake committed by his firm in an official statement.

"ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company," Zhao said.

Accompanying this public apology are slew of big changes in ZTE's top management, clearly indicating that the technology company has set the ball rolling to comply with the U.S export control regime. According to a statement, it has appointed a new CEO and made several other major changes to the senior management team.

Besides, ZTE has established a new compliance committee and aims to strengthen export control compliance training and processes.

The China's second-largest maker of telecom equipment will now come under renewed pressure following the verdict, after witnessing a continuous fall in its revenue owing to increased competition from other Chinese handset makers.

The company until recently was considered as part of the new generation of Chinese firms that could truly compete in the international market. But declining fortunes and adversarial impact on its reputation due to the illegal shipment case has made several experts wonder if ZTE can again reclaim the market goodwill.

The ZTE verdict has also brought focus on Huawei, another big Chinese smartphone manufacturer that is undergoing a probe by the U.S authorities for alleged violation of export restrictions to ban countries like Iran, North Korea and Sudan.

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