Published: Tue, April 17, 2018
Markets | By Noel Gibbs

ZTE Is Banned From Purchasing Components Made By US Suppliers

ZTE Is Banned From Purchasing Components Made By US Suppliers

It's unclear how the export order might affect the San Diego cellular technology company. It also sells phones through U.S. carriers AT&T, T- Mobile, and Sprint, which may prove problematic from here on out.

Efforts to reach ZTE America in Richardson, Texas, were unsuccessful. The commerce department issued new sanctions after it determined that ZTE has violated terms of its 2017 settlement agreement with the agency.

The commerce department initially probed ZTE's sales to Iran in 2016. The U.S. court ruled that ZTE had to pay $890 million in penalties with a possible additional penalty of $300 million. For starters, it prevents the ZTE from buying hardware components from companies like Qualcomm and Intel.

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The ban had been put in place in response to ZTE's violation of trade sanctions on Iran and North Korea, the United States said.

As part of the settlement, ZTE told US officials that it had reprimanded and cut bonus payments to more than three dozen employees involved in the transactions.

These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand. A report today from Bloomberg suggests that the violation comes from ZTE agreeing to fire four employees, while disciplining others as well as taking away their bonuses. "This egregious behaviour can not be ignored", Ross added. Third, these reinstated sanctions (denial of export privileges against ZTE) as it relates to the 2015 investigation, according to management, are clearly meant to send a message to Chinese companies doing business with the United States and could be part of a bigger plan in the USA government's recent trade war escalation with China.

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Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company.

According to the Department of Commerce Bureau of Industry and Security (BIS), the China-based company shipped the equipment to Iran and made false statements to the BIS during and after the investigation and trial.

The Commerce Department action came amid calls for more aggressive moves by USA authorities against Chinese communications and telecom firms. While the company went ahead with the launch, there is no announcement about the AT&T partnership.

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Shares of Qualcomm fell 1.7% on Monday.

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