US companies have been banned from supplying to Chinese telecoms equipment manufacturer ZTE for seven years after secretary of commerce Wilbur Ross accused the firm of further violations connected to the company’s previous admission of shipping of goods to Iran and North Korea.
According to Reuters, the ban could be catastrophic for ZTE, since American companies are estimated to provide 25% to 30% of components in ZTE’s equipment, and could exacerbate diplomatic tensions between China and the US.
China and the US have threatened each other with tens of billions of dollars in tariffs in recent weeks leading to fears of an all-out trade war.
Following the ZTE announcement, China has imposed a temporary deposit on US sorghum importers worth 178.6% of the value of their imports. The US is the world’s leading producer of sorghum and China uses it to feed livestock and in the production of alcoholic spirits.
The Commerce Department imposed the ban after claiming ZTE had violated an agreement to punish employees, reached after it was caught illegally shipping goods to Iran and North Korea.
China warned it was prepared to take action to protect the interests of Chinese firms and said it hoped the US could deal with the issue in accordance with the law.
In March 2017 ZTE agreed to pay a $1.19bn fine after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and misleading the US government.
ZTE also agreed to a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met, as well as if the company committed additional violations of the Export Administration Regulations (EAR).
The Department of Commerce said it had found ZTE had made false statements in 2016, during settlement negotiations, and 2017, during the probationary period, related to promised disciplinary action against senior employees.
“ZTE made false statements to the US government when they were originally caught... made false statements during the reprieve it was given, and made false statements again during its probation,” said Ross.
He said ZTE covered up the fact that it paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.
“Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behaviour cannot be ignored,” Ross said.
ZTE is China’s second largest telecom equipment maker after Huawei Technologies Co. It is also the fourth largest seller of smart phones in the United States.
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