Published: Mon, April 16, 2018
Worldwide | By Gretchen Simon

Commerce Blocks China's ZTE From Exporting Tech From US

Commerce Blocks China's ZTE From Exporting Tech From US

ZTE has been buying the hardware from the USA companies and using in its products which are later shipped to Iran and North Korea.

The Department of Commerce has now learned that ZTE made false statements to the US government during the 2016 settlement negotiations as well as the 2017 probationary period.

The FT's report notes that Levy's letter also cites a recent settlement between ZTE and U.S. officials, in which the Chinese firm agreed to pay a $1.2bn fines for violating United States sanctions on North Korea and Iran. "This egregious behavior can not be ignored", Secretary Ross said. The Chinese company used a series of shell companies to sell its products in Iran, and after pleading guilty, it promised to terminate four senior employees and to discipline 35 others. The biggest stinging point of this ban lies in ZTE's loss of access to Qualcomm components, including the Snapdragon line of SoCs. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low.

ZTE "provided information back to us basically admitting that they had made these false statements", said a senior department official.

ZTE didn't respond to calls seeking comment that were made after business hours in China. The majority of the ZTE smartphones in the United States are sold by the carriers.

Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).

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"ZTE misled the Department of Commerce".

This is a regulatory action and is unrelated to any ongoing trade-related actions.

A five-year federal investigation found last year that ZTE had conspired to evade US embargoes by buying USA components, incorporating them into ZTE equipment and illegally shipping them to Iran.

Allowing Huawei, ZTE, and other related entities access to US government communications would be inviting Chinese surveillance into all aspects of our lives.

The new restrictions stem from a January 16 report by a US monitor appointed by a federal judge in Texas who accepted the guilty plea in March 2017.

While ZTE can continue to sell its products in the United States, being unable to use parts from Qualcomm, Intel, and other USA companies could prove to be devastating to the firm.

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