US Companies banned from providing ZTE with parts

Daniel Fowler
April 17, 2018

The Commerce Department has imposed a "denial of export privileges" against ZTE, which translates to a ban on United States companies selling any products and services to the China-based company.

The agreement that was violated stemmed from ZTE's attempt at conspiring to illegally ship USA goods to Iran a few years back, which it had already paid heavy fines from.

To date, ZTE paid the $890 million penalties and fired the four senior employees, but has yet to reprimand the 35 other employees.

Viavi Solutions (VIAV) is one company that has business with ZTE, though only a small amount, according to William Blair analyst Dmitry Netis. Secretary of Commerce Wilbur Ross was quoted as saying in an announcement by the department.

The Commerce Department said ZTE was supposed to fire four senior employees and discipline 35 others, whether by reducing their bonuses or issuing them a letter of reprimand.

The Hong Kong-listed shares of ZTE were suspended on Tuesday.

The Commerce Department expressly said its action against ZTE is "is unrelated to any ongoing trade-related actions".

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

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The ruling comes as a effect of ZTE's actions after a court ruling a year ago. The company had been selling its equipment to Iran and North Korea, which was a major no-no under the trade agreement. Acacia Communications Inc. shares fell by 34.7%, a drop influenced by the fact that almost a third of the company's 2017 revenue came from ZTE. Yes, not sending letters is what got ZTE into this mess.

Subsequently, the Department of Commerce claims to have found that statements made by ZTE to the Bureau of Industry and Security were false.

The ban was issued by the Commerce Department's Bureau of Industry and Security, which monitors the sale of US technology to overseas firms.

"We can't trust what they are telling us is truthful", the official continued. Pittenger is sponsoring legislation that would strengthen the USA national security review process for foreign investments.

A denial of export privileges means that ZTE will not be able to purchase mobile components from American companies.

The UK's National Cybersecurity Centre (NCSC) has written to UK telcos warning them that using network equipment manufactured by Chinese firm ZTE would negatively impact the UK's national security.

On its website, ZTE says it is the fourth largest supplier of smartphones in the US, serving all four major wireless operators with low and mid-price handsets - including devices for pre-paid plans.

Intel, Microsoft, Qualcomm and Micron Technology are also among United States suppliers to ZTE, according to data compiled by Bloomberg. The U.S. government has warned American consumers and businesses to steer clear of Huawei devices.

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