Published: Mon, April 16, 2018
Finance | By Claude Patterson

United States bans American companies from selling to Chinese phone maker ZTE

United States bans American companies from selling to Chinese phone maker ZTE

Secretary of Commerce Wilbur L. Ross, Jr. today announced that the U.S. Department of Commerce's Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China ("ZTE Corporation") and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China ("ZTE Kangxun") (collectively, "ZTE").

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.

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

ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain.

A senior official told reporters the department suspended export privileges for ZTE, meaning it can no longer receive U.S. components to incorporate into their products "to prevent them from furthering their illegal activities. This egregious behavior can not be ignored", Commerce Secretary Wilbur Ross said in the statement. The seven-year ban has been placed on ZTE for violating the terms of a sanctions violation case, according to US officials.

The agreement called for the company to pay $892 million in fines and forfeitures and be subject to an additional $300 million in penalties if it violates the terms of the settlement.

Trump on Monday accused China along with Russian Federation of devaluing their currencies, opening a new front in his argument that foreign governments are exploiting the U.S.

The official said there is no "off ramp" for the company to seek a reversal of the blockade. The company is making personnel changes and instituting new compliance procedures, he said.

The U.S. government's investigation into sanctions violations by ZTE followed reports by Reuters in 2012 that the company had signed contracts to ship millions of dollars' worth of hardware and software from some of the best known U.S. technology companies to Iran's largest telecoms carrier. It's also illegal for other businesses or individuals to participate in transactions with a company that has been denied export privileges, according to the department.

ZTE officials did not immediately respond to requests for comment.

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