Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly and I take a deep dive back into the issue of the ZTE monitorship announced recently as a part of the settlement with the Department of Commerce on the death penalty sanctions levied on the company in April.
That sanction was an export denial which barred American companies from selling components to ZTE and its subsidiary. American companies, such as the San Diego-based chipmaker Qualcomm supplied critical parts for ZTE’s its networking gear and smartphones. This sanction came on the heels of a $891 million fine and penalty the company agreed to in March 2017 for its first round of export control violations. The second sanction was for failing to live up to the terms of the DPA the company agreed to in 2017.
In the 2017, the company agreed to a monitor, who was appointed by the District Court which accepted the company’s guilty plea. Under the May 2018 supplemental sanction, ZTE agreed to pay an additional $1 billion in penalties, put $400 million in escrow, and accept a U.S.-appointed compliance department. According to the Department of Commerce Press Release, the new agreement requires ZTE "to retain a team of special compliance coordinators selected by and answerable to" the Commerce Department for ten years. This new compliance function will essentially serve as the Department of Commerce’s monitor at ZTE as the Press Release noted, "Their function will be to monitor on a real-time basis ZTE’s compliance with U.S. export control laws.”
Matt and I take a deep dive into the DOC resolution, the monitorship and how it might work and the use of a sanctions regime by the administration as a tool to brow beat other countries. We discuss in detail on this bizarro arrangement of U.S. regulators appointing an in-house compliance executive to act as a monitor to the Chinese telecom firm. The concept is intriguing, and the job could be the professional challenge of a lifetime — except for all those pesky details, including the ones this settlement still leaves unaddressed.
For more reading: see Matt’s piece on “FAQs on ZTE’s Compliance Settlement” and “Trade War! Trade War! Man the Barricades!”,both on Radical Compliance. See Tom’s piece, “The ZTE Department of Commerce Monitor: unchartered waters” in Compliance Week.