ZTE faces export sanctions from US Department of Commerce

Chinese communications systems vendor ZTE, which was declared a threat to U.S. security by Congress in 2012 (see "U.S. House Intelligence Committee sees Huawei and ZTE as security threats"), is in hot water with the U.S. government again. Multiple press reports suggest that the U.S. Department of Commerce will soon announce export restrictions that will limit if not eliminate access to U.S. technology that ZTE uses in its communications equipment. The restrictions are the result of assertions that ZTE has sold communications equipment to Iran that contain U.S.-sourced technology banned from export to the Middle Eastern country.

The restrictions would require those interested in supplying U.S. technology to ZTE Corp., Chinese affiliates ZTE Kangxun Telecommunications Ltd and Beijing 8-Star, and ZTE Parsian of Iran, to apply to the Department for permission, according to Reuters. It is unlikely such permission would be granted.

The sanctions would be set in place tomorrow, according to the reports. ZTE can appeal the decision.

IBM, MicroSoft, and Qualcomm are among the U.S.-based companies that are or have supplied technology to ZTE.

Reuters reported in 2012 that ZTE had signed contracts to sell equipment into Iran made with U.S. technology banned from export into the country, which is the target of U.S. economic sanctions. On Sunday, Reuters reporters said they had seen documents in Commerce Dept. possession that ZTE was aware that the equipment contained U.S. technology and therefore was in violation of the U.S. sanctions. The documents suggest ZTE had considered setting up shell companies to avoid getting caught.

In response to a question on the matter asked this morning during his regular media session, China Foreign Ministry spokesman Hong Lei said, “The Chinese side is firmly opposed to the US using domestic laws to place sanctions on Chinese companies. The Chinese side urges the US side to call off the wrong action lest it should jeopardize economic cooperation and relationship between China and the US.”

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