Chinese tech giant ZTE will be forced to pay a fine of $1 billion and make changes to their executive team according to Commerce Secretary Wilbur Ross. The deal comes after weeks of talks between the Trump administration and the Chinese government.
The US has reached an agreement to lift sanctions on Chinese telecom equipment maker ZTE, Commerce Secretary Wilbur Ross said Thursday.
"At about 6 a.m. this morning, we executed a definitive agreement with ZTE," Ross told CNBC. "And that brings to a conclusion this phase of the development with them."
The deal will force ZTE to pay an additional $1 billion fine and place $400 million in escrow in the event the company violates sanctions again. In addition to the monetary damages, ZTE will be forced to make changes to its management and submit to closer examinations by a US compliance team.
"We think this settlement, which brought the company — a $17 billion company — it its knees, more or less put them out of business, now they're accepting having the compliance team come in, whole new management, whole new board, should serve as a very strong deterrent not only for them but for other potential for bad actors," Ross said.
The deal ends a tense period of negotiations between the US and Chinese governments over the telecom equipment maker.
The US originally placed sanctions on ZTE for selling goods with US parts into Iran and North Korea, a violation of sanctions against those countries. But after the Commerce Department determined that ZTE did not abide by those original sanctions, the company was hit with an even harsher penalty: It was not allowed to buy US parts.
Given ZTE's reliance on US-made parts, the sanctions effectively crippled the company and forced major operations to cease.
Though some Trump administration officials attempted to frame the ZTE sanctions as a separate national security issue, the president himself appeared to pull the discussions into the broader talks over trade.
The Trump administration's deal-making process on ZTE has been roundly criticized by lawmakers of both parties. They raised national security concerns about ZTE, a view shared by US intelligence agencies and other countries.
In may, phones made by ZTE were banned by the Pentagon for sale on military bases due to security concerns.