REUTERS

China seized the vehicle in international waters, in one of the most serious confrontations between the powers in decades, BBC News reports.

The U.S. said it would continue to "fly, sail, and operate in the South China Sea" where international law allows.

Read alsoBloomberg: Pentagon says China to return drone; Trump says they can keep it"After friendly consultations between the Chinese and U.S. sides, the handover was smoothly completed at midday," China's defense ministry said in a statement on Tuesday.

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The Pentagon had said the drone, known as an unmanned underwater vehicle (UUV), was being used to carry out scientific research at the time it was captured.

The latest statement described the incident as inconsistent with international law and codes of conduct between navies at sea, and that it would continue to investigate.

China has claimed territorial rights over most of the South China Sea but its claims are disputed by several nations.