Smartphone Maker ZTE to Face Parts Export Restrictions From U.S.

The restrictions would mean that ZTE would have a tougher time getting needed American parts or equipment due to its dealings with Iran.  

ZTE, smartphones, Iran, China, telecom equipment, Commerce Department, exports

Chinese smartphone and telecom equipment maker ZTE, which allegedly violated U.S. laws by shipping parts from U.S. technology companies to Iran in recent years, is slated to be hit with export restrictions by the U.S. Commerce Department as a punishment.

The pending export restrictions will "make it difficult for the company to acquire U.S. products by requiring ZTE's suppliers to apply for an export license before shipping any American-made equipment or parts to ZTE," according to a March 6 article by Reuters. "The restrictions will take effect Tuesday, Reuters has learned, and apply to any company worldwide that wants to ship American-made products to ZTE Corp in China. Those companies are not the target of the export curbs on ZTE."

ZTE can appeal the action, which will certainly affect its business, the story reported.

In a statement on its Website, ZTE said it is "fully committed to compliance with the laws and regulations in the jurisdictions in which it operates. ZTE has been cooperating, will continue to cooperate and communicate with all U.S. agencies as required. The company is working expeditiously towards resolution of this issue."

In a separate statement to Reuters, ZTE said it is "highly concerned about recent media reports relating to a U.S. Department of Commerce investigation" and that it has been "working with associated U.S. government departments on investigations since 2012" to resolve the issues.

The investigation into ZTE by the Commerce Department for alleged export-control violations follows reports by Reuters in 2012 that the company had "signed contracts to ship millions of dollars worth of hardware and software from some of America's best-known technology companies to Iran's largest telecoms carrier, Telecommunication Company of Iran (TCI), and a unit of the consortium that controls it." The U.S. companies that provided the products to ZTE for the alleged sales, including Microsoft, IBM, Oracle and Dell, said they "were not aware of the Iranian contracts at the time," the story reported.

The Commerce Department action followed because the United Stats for years has banned the sale of United States-made technology products to Iran, the story reported. "The Commerce Department's investigation focused on whether ZTE had acquired American products through front companies and then shipped them to Iran in violation of U.S. sanctions."

Internal ZTE documents were obtained by the Commerce Department for its investigation, including some that were marked as "Top Secret," the story reported. "The day after the first Reuters article was published in March 2012, a ZTE spokesman said the company would 'curtail' its business in Iran. The company later issued a statement saying: 'ZTE no longer seeks new customers in Iran and limits business activities with existing customers.'"

One internal ZTE document, which was among several examined by Reuters, describes ways to export American products subject to U.S. sanctions by using shell companies to avoid getting caught.

In a related Reuters report, the Chinese Foreign Ministry expressed anger at the U.S. government's planned export restrictions against ZTE.

"China is opposed to the U.S. citing domestic laws to place sanctions on Chinese enterprises," Chinese Foreign Ministry spokesman Hong Lei said at a news briefing. "We hope the U.S. stops this erroneous action and avoids damaging Sino-U.S. trade cooperation and bilateral relations."

China and Iran have close diplomatic, economic, trade and energy ties, and China was active in pushing both the United States and Iran to reach agreement on Iran's controversial nuclear program, according to Reuters.

ZTE has been shipping its smartphones and other products to the United States for years, including the ZTE ZMAX2 through AT&T in September 2015 and the ZTE Warp Elite in August 2015 through Boost Mobile.