US Government Crushes ZTE With Ban on US Companies Providing It Components

Alicia Cross
April 17, 2018

The ban lasts for seven years and comes into effect after ZTE allegedly violated the terms of a 2017 settlement, officials from the Commerce Department's Bureau of Industry and Security said Monday in a conference call.

The Department of Commerce announced on Monday it is placing a ban that will forbid USA companies from doing business with the Chinese phone maker, including supplying it with parts and service contracts. A five year long federal investigation concluded that the company had been buying USA components and using them in its own products, some of which had been distributed in Iran and North Korea.

The US Department of Commerce has banned American companies from selling components to ZTE for seven years after breaking an agreement reached after it was caught illegally shipping goods to Iran.

Naveed Saeed of Engro Foods said the company will be able to reduce its energy consumption by 10 per cent, resulting in significant carbon emission reduction. "This egregious behavior can not be ignored", Secretary Ross said. While ZTE makes a range of models, it's made particular in-roads in the USA with budget handsets that are sold through discount and prepaid carriers.

While ZTE can survive this ban, it will severely hurt the company in the short-term.

In the UK, Dr Ian Levy, technical director of the National Cyber Security Centre, wrote to telecommunications organisations saying: "NCSC assesses that the national security risks arising from the use of ZTE equipment or services within the context of the existing UK telecommunications infrastructure can not be mitigated".

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Trade tensions with China have been rising, with the Trump administration threatening to impose tariffs on Chinese imports.

"We hope the United States will properly handle the matter in accordance with regulations and create a fair, equitable and stable legal and policy environment for the company", a Commerce Ministry statement said.

Obviously, it has the potential to severely impact ZTE's business in a negative way.

In a separate development, the United States has just banned ZTE from using U.S. supplier for seven years for violating the terms of a sanctions violation case.

ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain. After political issues effectively killed Huawei's ability to sell phones via USA carrier AT&T, and President Donald Trump blocked the Broadcom-Qualcomm deal, this is another case of the US using its powers over trade to effectively prevent China from having too much influence within the American economy. The company was required to discipline certain employees as part of that agreement. As part of the ensuing settlement, ZTE promised to fire four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them.

The new restrictions stem from a January 16 report by a USA monitor appointed by a federal judge in Texas who accepted the guilty plea in March 2017.

Other reports by Free-Prsite

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