Washington
The company will pay a $1 billion fine and fund a new in-house compliance team staffed by U.S. experts, Ross told CNBC.
The move eases a seven-year ban on ZTE buying American parts, which Commerce levied in April. At the time, the Chinese government complained that the action could put the company, a major employer and star of the Chinese technology industry, out of business.
“We are literally embedding a compliance department of our choosing into the company to monitor it going forward. They will pay for those people, but the people will report to the new chairman,” Ross said. “This is a pretty strict settlement. The strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”
The Commerce Department action came after President Donald Trump tweeted last month that he planned to help ZTE because “too many jobs in China” would otherwise be lost. The president’s extraordinary intervention in an enforcement matter drew widespread criticism on Capitol Hill from members of both parties.
Reaction on Thursday was no warmer.
“China is eating our lunch and this president is serving it up to them,” House Majority Leader Nancy Pelosi said on Thursday.
Senate Majority Leader Charles Schumer called for Congress to reverse the decision, which is unlikely. A proposal by Sen. Chris Van Hollen, D-Md., to bar such forgiveness for Chinese telecom companies is not retroactive and thus would not cover the ZTE deal, according to an analysis by Cowen Research Group.
Under the 23-page definitive agreement announced by Ross, ZTE also is required to change its entire board of directors and executive team within 30 days.
The government will hold $400 million of ZTE’s money in escrow as a hedge against future violations by the company, which last year settled criminal and civil charges in connection with its violation of U.S. sanctions on Iran and North Korea.
ZTE was found to have shipped its sophisticated telecommunications equipment to both countries, which the State Department lists as supporters of terrorism, and to have repeatedly lied to U.S. investigators about its actions.
The company paid $892 million in fines, with an additional $300 million suspended to encourage compliance with the settlement. The $400 million escrow likely includes those suspended funds, according to Doug Jacobson, a trade Washington, D.C., trade attorney.
He said the new agreement expands provisions in last year’s settlement, which provided for an independent compliance monitor to oversee the company’s activities.
Carlos Gutierrez, who was Commerce Secretary under President George W. Bush, said the change in the U.S. penalty likely averted a worsening in relations with China.