China telecom agrees to fine, monitoring by U.S.

WASHINGTON—The United States and China have reached a deal that allows the Chinese telecommunications giant ZTE Corp. to stay in business in exchange for paying an additional $1 billion in fines and agreeing to let U.S. regulators monitor its operations.

The fine announced Thursday comes on top of $892 million ZTE has already paid for breaking U.S. sanctions by selling equipment to North Korea and Iran. The Commerce Department said that ZTE must also put $400 million in escrow—a sum that it would forfeit if it violated Thursday’s agreement.

In addition, a compliance team chosen by the United States will be embedded at ZTE and the Chinese company must change its board and executive team.

President Donald Trump has drawn fire from Congress for intervening in the case to rescue a Chinese company that had violated U.S. sanctions against two rogue nations pursuing nuclear weapons programs.

“ZTE is essentially on probation,” said Amanda DeBusk, chair of the international trade and government regulation practice at Dechert LLP and a former Commerce official. “It’s unprecedented to have U.S. agents as monitors … It’s certainly a good precedent for this situation. ZTE is a repeat offender.”

In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived U.S. regulators after it settled charges last year of sanctions violations: Instead of disciplining all employees involved, Commerce said, ZTE had paid some of them full bonuses and then lied about it.

The decision amounted to a death sentence to ZTE, which relies on U.S. parts and which announced that it was halting operations. The ban also hurt American companies that supply ZTE.