US Bans Exports to ZTE Crippling Company's Ability to Make Devices

Saul Bowman
April 17, 2018

In March 2017, ZTE had been fined $1.2 billion by the United States for directly, or through third-party distributors, shipping $32 million worth of products containing American-made equipment to Iran between 2010 and 2016 without the proper licensing.

ZTE, headquartered in the southern city of Shenzhen, pleaded guilty in March 2017 and agreed to pay a $1.19 billion penalty for shipping the telecoms equipment to North Korea and Iran in violation of USA regulations.

"We are in a complicated global situation", Yin said in an open letter circulated online, warning that the company faces "twists and turns" overseas. As part of the initial agreement, ZTE was allowed to continue to work with USA companies, assuming it adhered to the rules laid out in the agreement.

In addition to the monetary penalties, ZTE agreed to perform audits and to make truthful disclosures to federal investigators for the seven year probationary period. ZTE has also been repeatedly name-checked by USA intelligence officials over spying concerns, along with Huawei.

According to Secretary of Commerce Wilbur L. Ross, Jr., ZTE made false statements to BIS in 2016 during the settlement agreement and later when an update was requested by the USA government. ZTE, they say, has refused to discipline the employees responsible as per the agreement.

Later admissions indicate that the reported actions never took place and that all of the employees, except for one, earned their bonuses.

The Commerce Department Denial Order also reversed the suspension of $300 million that was part of a $661 million civil penalty for its activities.

The ban may result in more tension between the USA and China.

In a letter sent to United Kingdom telecoms companies, the technical director of the NCSC Ian Levy warned that the use of ZTE equipment or services would present a risk to United Kingdom national security.

A senior official with the U.S. Commerce Department Bureau of Industry and Security told reporters that the ZTE decision was unrelated to the administration's threats to impose tariffs on Chinese imports, saying the actions against the Chinese company are part of an investigation. And it sells smartphones in the companies, like AT&T, T-Mobile, and Sprint.

For ZTE, it has been a rough 24 hours, with the United States government hitting the company with a USA export ban.

In February, the heads of the CIA, FBI, NSA, and the director of national intelligence to the Senate Intelligence Committee also recommended that Americans not use products from Huawei and ZTE. The Federal Communications Commission has proposed a new set of rules to restrict ZTE, Huawei and other Chinese firms from offering their products through US mobile companies.

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