ZTE has agreed to pay USD 892.36 million in criminal and civil fines for violating US sanctions against Iran. The company reached a settlement with the US Departments of Justice and Treasury and Department of Commerce's Bureau of Industry and Security that will see it avoid another USD 300 million in penalties if it complies with a number of changes to its business aimed at avoiding the violations in future.
"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company," said CEO and chairman Zhao Xianming. The appointment of Zhao last year and chief export compliance officer Matt Bell in November are among the company's efforts to improve its practices. It also has a CEO-led Compliance Committee with the remit to "significantly change" the company’s policies and procedures and provide greater oversight of support for the compliance initiatives.
In addition, ZTE removed compliance from the responsibility of the legal department and created a separate compliance department with increased headcount to build the compliance program with full independence. A new Export Control Compliance Manual created in conjunction with the review by BIS of its operations will provide more detailed guidance to employees. ZTE also now requires an annual Compliance Commitment Agreement from all employees.
A software tool will screen shipments from ZTE and certain subsidiaries for export control obligations. The system is used to determine which items are subject to the Export Administration Regulations, provides embargo and restricted party screening on the transactions, and places shipments on hold that require detailed classification analysis, application of license exceptions, or application of licenses when necessary.
ZTE warned last month that it expected a significant financial impact from the US investigation. The settlement means the company avoids having restrictions imposed on its suppliers exporting from the US or its own products in the country. The Chinese company first disclosed the problems in the US in March 2016 and has since benefited from a waiver of the export restrictions while it negotiated a settlement with the US authorities.
The DoJ said the investigation took over five years and at one point during the process, ZTE even resumed shipments to Iran. ZTE was charged with violating the sanctions over a period of six years (January 2010 to January 2016) by using US-origin products in shipments to Iran without an export licence. The US goods were worth around USD 32 million. In addition, ZTE was charged with obstructing justice and making false statements. The plea deal with the DoJ is subject to approval by a federal court in Texas, and ZTE will be subject to independent audits for the next seven years to ensure its compliance.
