US Commerce Department to place restrictions on China's ZTE
The U.S. Commerce Department is set to place export restrictions on Chinese telecoms equipment maker ZTE Corp for allegedly violating U.S. export controls on Iran, according to documents seen by Reuters.
The restrictions will make it difficult for the company to acquire U.S. products by requiring ZTE's suppliers to apply for an export license before shipping any American-made equipment or parts to ZTE. According to a Commerce Department notice that will be published next week in the U.S. Federal Register, the license applications generally will be denied.
The restrictions will take effect Tuesday, Reuters has learned, and apply to any company worldwide that wants to ship U.S.-made products to ZTE Corp 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 U.S. 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.
The Commerce Department investigated ZTE for alleged exportcontrol 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, Telecommunication Co of Iran (TCI), and a unit of the consortium that controls it.
The U.S. product makers - which included Microsoft Corp, IBM, Oracle Corp and Dell Inc 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 U.S.-made tech products to Iran. 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 U.S. 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.
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 U.S." It also states: "Lots of chips or software used in the products of our company is from U.S. suppliers."
One of ZTE's websites also states that several major U.S. tech companies, including Microsoft, Intel Corp, IBM and Honeywell International Inc, are "key strategic partners of ZTE." The terms of the partnerships are not described.
A spokeswoman for Microsoft said the company had a licensing agreement with ZTE but could not confirm if the Chinese company purchases other products, such as software. The other U.S. companies did not respond to requests for immediate comment.