U.S. Appoints Special Compliance Coordinator For ZTE

The appointment is part of the settlement between the Department of Commerce and ZTE

The U.S. Department of Commerce has appointed Roscoe Howard Jr. to be the special compliance coordinator (SCC) for Chinese vendor ZTE.

The special compliance coordinator was selected after a rigorous search by the Bureau of Industry and Security (BIS). This appointment is the result of the settlement between the Department of Commerce and ZTE that includes a $1.76 billion fine, a ten-year probationary period, and the installation of the coordinator to conduct regular and comprehensive compliance supervision by a team answerable to BIS.

“This appointment is the continuation of the unprecedented measures imposed on ZTE by the Department of Commerce,” said Secretary of Commerce Wilbur Ross. “Mr. Howard is exceptionally well-versed in corporate compliance, having tried more than 100 cases as a federal prosecutor, as well as helping those in the private sector on compliance and ethics issues.”

“My team and I will be vigilant in efforts to ensure that ZTE complies with all U.S. export control laws and regulations,” Howard said.

The Special Compliance Coordinator’s function will be to coordinate, monitor, assess, and report on compliance with U.S. export control laws by ZTE, its subsidiaries, and affiliates worldwide. The Department of Commerce said that the coordinator will operate with unprecedented access across the company.

The seven-year export ban had been imposed by the Department of Commerce’s BIS in March this year after the vendor allegedly did not live up to the terms of an agreement that had been worked out after it illegally shipped telecom equipment to Iran and North Korea. In early May, ZTE said it had ceased its major operating activities due to the export ban.

Last month, the U.S. Department of Commerce formally lifted a ban on U.S. companies selling components and software to ZTE, after it complied with all the requirements of a settlement agreed to in June.

On July 13, Secretary of Commerce Wilbur Ross announced that ZTE had placed $400 million in escrow at a U.S. bank.  Shortly after the deposit, the Department lifted the denial order on ZTE. The escrow funds are in addition to the $1 billion penalty imposed by Commerce that ZTE paid to the U.S. Treasury last month.

The government said that the $1.4 billion paid under the new settlement agreement are in addition to the $892 million in penalties ZTE has already paid to the U.S government under a March 2017 settlement agreement.

ZTE has recently issued a revised earnings report for the first quarter of the year that puts quarterly losses at more than CNY 5.4 billion ($790 million) after taking into account the recent ban imposed by the U.S. government.

The vendor had previously reported a net profit of CNY 1.69 billion for the first three months of 2018, compared with a net profit of CNY 1.2 billion in the year-ago period. Revenue increased 6.9% on year to CNY 27.5 billion.

In its update, the company said it had booked about CNY 6.7 billion in non-operating expenses as a result of the U.S. ban.

Executives also reiterated guidance it issued earlier this month that said it expects a net loss in the CNY 7 billion to CNY 9 billion range for the first half of the year, versus a net profit of CNY 2.29 billion a year earlier. – Rcr Wireless