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US considering placing compliance officers inside China's ZTE: Commerce Secretary Ross

Key Points
  • The U.S. is looking at alternatives to the sanctions threatening Chinese telecom giant ZTE, Wilbur Ross says.
  • Under consideration, according to the Commerce secretary, would be "implanting people of our choosing into the company to constitute a compliance unit."
  • Last month, Washington banned ZTE from purchasing parts from U.S. companies, including Qualcomm, Corning and Google.
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Ross: ZTE management lied on multiple occasions

The United States is looking at alternatives to the crippling sanctions threatening the survival of Chinese telecom giant ZTE, Commerce Secretary Wilbur Ross told CNBC on Thursday.

Ross said on "Squawk Box" the U.S. is considering a plan to require compliance officers to be installed at ZTE, best known by consumers for selling smartphones.

"If we do decide to go forward with an alternative, what it literally would involve would be implanting people of our choosing into the company to constitute a compliance unit ... [which] would report back to the Department of Commerce," he said. "The whole key is enforcement."

Last month, Washington banned ZTE from purchasing parts from U.S. manufacturers, including chips from Qualcomm, glass from Corning and Android software from Alphabet's Google, because it was selling equipment with American parts to Iran and North Korea in violation of U.S. sanctions. The ban was imposed after ZTE admitted guilt and paid nearly $1.2 billion in fines for those violations.

ZTE, in addition to smartphones, has been a large manufacturer of telecommunications equipment that allows large carriers to operate their wireless and data networks. It was China's first state-owned telecom equipment maker to go public. It's listed on the Shenzhen and Hong Kong stock exchanges.

Employees work on the North America project line of smartphone at a workshop of ZTE Corp. on July 26, 2016 in Xi an, China.
VCG | Getty Images

The ZTE situation is complicating efforts by the administration of President Donald Trump to reach an overall trade agreement with China, designed to level the playing field for American companies in a number of industries, including autos, that face stiff tariffs and requirements to share their technology to do business there.

Trump asked the Commerce Department to consider other measures, besides sanctions, to make sure ZTE lives up to its agreements, Ross told CNBC on Thursday. The idea ran into resistance in Congress, where Republicans and Democrats, accused the president of bending to pressure from China to reach an overall trade deal.

However, just days after Washington and Beijing put a trade war on hold, Trump cast doubt Wednesday on whether an overall deal can be reached.

On Tuesday, Trump said he was "not satisfied" with the China trade talks that took place last week in Washington. He also denied reports of a ZTE agreement, while floating the idea of a fine of up to a $1.3 billion and changes in ZTE management. Ross confirmed on Thursday no final decision has been made on ZTE.

Last week, Trump revealed that ZTE might get a reprieve.

— CNBC's Jacob Pramuk and Todd Haselton and Reuters and AP contributed to this report.

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