US Bans American Companies From Selling Parts to Chinese Phone Maker ZTE

NCSC warns UK telcos against ZTE equipment due to 'national security' concerns

NCSC warns UK telcos against ZTE equipment due to 'national security' concerns

The U.S. action, first reported by Reuters, could be devastating to ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes networking gear and smartphones.

Denying ZTE export privileges prevents the company from "participating in any way in any transaction" subject to the USA government's Export Administration Regulations, which govern sales of sensitive technology overseas. Along with a huge penalty of $1.19 billion, ZTE can't use the hardware and software from the United States companies for the next seven years.

Now, the United States government has banned ZTE from using the hardware or software from the American companies. This egregious behavior can not be ignored.

On top of the false statements regarding USA components, Ross also claims ZTE did not live up to promises when it came to firing or disciplining employees who were directly involved with the initial complaint. In March, however, the firm admitted that it hadn't disciplined the 35 employees, or even reduced their bonuses. Acacia Communications Inc, which got 30 percent of its total 2017 revenue from ZTE, tumbled 35 percent, hitting a near two-year low.


The Commerce Department has determined ZTE made false statements to the Bureau of Industry and Security in 2016 and 2017 related to "senior employee disciplinary actions the company said it was taking or had already taken", the department said in a statement Monday.

ZTE didn't respond to calls seeking comment that were made after business hours in China.

Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company. The majority of the ZTE smartphones in the U.S. are sold by the carriers. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR). Despite the fact that it's a company based in China, ZTE was found to be selling technology from the U.S.to Iran through multiple shell companies.

The U.S. action against ZTE is likely to further exacerbate current tensions between Washington and Beijing over trade. USA versions of ZTE phones were found to have a backdoor in 2012.

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