US Commerce Secretary Wilbur Ross has announced that the Chinese telecoms equipment maker has signed a definitive agreement to pay more than one billion dollars in fines in exchange for the removal of US sanctions.
Wilbur Ross unveiled details of the deal in an interview for US television channel CNBC on Thursday, saying that ZTE had agreed to pay out $1.4 billion (€1.18 billion) in return for the lifting of a ban that prevented it buying vital US components.
China's second-largest telecoms equipment maker was banned from the US market in April, after the company was caught violating US sanctions on Iran and North Korea and the terms of a subsequent plea agreement.
"At about 6 a.m. this morning, we executed a definitive agreement with ZTE. And that brings to a conclusion this phase of the development with them," Ross told CNBC.
Noting that the deal imposed the strictest compliance ever on any company, American or foreign, Ross added: "We are literally embedding a compliance department of our choosing into the company."
ZTE is highly dependent on US suppliers for parts used in its phones and other products. The ban forced the company to partially shut down its operations and nearly brought it to the brink of collapse. Last year, the company was already fined $1.2 billion for violating US sanctions.
Back in business at a cost
The agreement reached between Washington and ZTE foresees that the Chinese company will pay a $1 billion cash fine and place $400 million in escrow, to be forfeit if violations continue.
In addition, for the next 10 years the company will have to hire a compliance team, selected by US authorities, to monitor its business on a "real-time basis."
If it is caught violating the agreement at any point in the next decade, it will face a 10-year ban on sourcing US components.
Ross again insisted that the ZTE action was separate from broader China trade talks. However, the removal of the ban on ZTE has been among Beijing's top priorities in the trade negotiations. US President Donald Trump himself linked ZTE's fate to the talks, saying that China's president Xi Jinping had personally requested that he intervene in the case.
The agreement follows growing criticism within the Republican party of the president's handling of trade negotiations with China and attempts by some in Congress to rein in his authority to impose tariffs on the EU, Canada and other allies in the name of national security.
Immediately after the deal was announced, Republican senator Marco Rubio lashed out at the agreement, calling it a "very bad deal" on Twitter, and vowing to continue his push for congressional action to block it.
ZTE has long been the target of suspicion in the US intelligence community, which has warned that its handsets and telecommunications network equipment pose a threat to US national security.
uhe/jd (Reuters, dpa)