Economy, Sci & Tech

US to Penalize ZTE Over Iran Trade

US to Penalize ZTE Over Iran Trade
US to Penalize ZTE Over Iran Trade

The United States’ Commerce Department is set to place export restrictions on Chinese telecoms equipment maker ZTE Corp. for allegedly violating US export controls on Iran dating back to 2012.

The restrictions will make it difficult for the company to acquire US products by requiring ZTE suppliers to apply for an export license before shipping any American equipment or parts to ZTE.

According to a Commerce Department notice that will be published next week in the US Federal Register, license applications are generally denied, Reuters reported.

The restrictions will take effect on Tuesday and apply to any company worldwide that wants to ship US-made products to ZTE in China. Those companies are not the target of the export curbs on ZTE.

“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.

The official declined to comment on whether the US government might take further action against ZTE.

A spokesman for ZTE, based in Shenzhen, China, could not be reached for immediate comment. The company can appeal the action.

 US Export Violations

The Commerce Department investigated ZTE for alleged export-control violations following 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 tech firms to Iran’s largest telecom carrier, Telecommunications Company of Iran, and a unit of the consortium that controls it.

The US product makers, which included Microsoft, IBM, Oracle and Dell, have all said they were not aware of the Iranian contracts. It is not clear if any of these companies still do business with ZTE.

Washington has long banned the sale of US-made tech products to the Iranian government. The Commerce Department’s investigation focused on whether ZTE had acquired American products through front companies and then shipped them to Iran, a violation of US sanctions.

Commerce Department investigators obtained internal ZTE documents—some marked by the company “Top Secret”—outlining an alleged sanctions-busting scheme. Reuters reviewed some of the documents.

The senior Commerce Department official declined to comment on whether ZTE had carried through with the alleged scheme.

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.”

What effect the new export restrictions will have on ZTE’s current global business is not clear, but it is unlikely to pull out of the Iranian market, although a majority of sanctions against Iran have been removed after it reached a historic nuclear deal with world major powers.

One undated internal ZTE document obtained by Commerce Department investigators and reviewed by Reuters states: “Our company has many technologies and components that came from suppliers in the US.”

It also states: “Lots of chips or software used in the products of our company are from US suppliers.”

One of ZTE’s websites also states that several major US tech companies, including Microsoft, Intel, IBM and Honeywell International, all freely available in Tehran, are “key strategic partners of ZTE”. The terms of the partnerships are not described.

ZTE is one of the world’s largest telecom equipment makers with operations in 160 countries, according to its website. It also is a major manufacturer of mobile handsets.

Founded in 1985, its shares trade on both the Hong Kong and Shenzhen stock exchanges.

Besides ZTE, the export curbs will apply to two of its Chinese affiliates, ZTE Kangxun Telecommunications Ltd. and Beijing 8-Star, and an Iranian company, ZTE Parsian.

 ZTE Reenters With Cellphones

In recent news, a local mobile phone importer and after-sales service company named Yas has unveiled ZTE’s mobile phone V6 in Iran.

The company, which holds the legal dealership of ZTE, held a seminar in Tehran in January announcing the reentry of the brand with handsets, local technology website ITIRAN reported at the time.

According to the company’s sales manager, Mohammad Rishpour, ZTE expressed interest in reentering Iran’s market three years ago and the two companies negotiated a deal.

“ZTE hopes to carve a market share with a special focus on customer satisfaction,” he said.