Chinese Mobile Device Maker ZTE Banned From Buying US Goods

Visitors pass in front of the ZTE Corp. booth at the Mobile World Congress in Barcelona Spain

Visitors pass in front of the ZTE Corp. booth at the Mobile World Congress in Barcelona Spain

The Commerce Department said Monday it will prohibit American companies from selling products to ZTE, which violated the terms of a deal made after the USA alleged that ZTE skirted sanctions against North Korea and Iran.

For ZTE, it has been a rough 24 hours, with the United States government hitting the company with a U.S. export ban. ZTE illegally circumvented the sanctions, selling phones and other goods to the two countries.

The news comes after ZTE previous year pled guilty in federal court to subvert us sanctions in Iran. In fact you might only recognise them for that freaky dual-screen phone that's coming to the United Kingdom very soon. "This egregious behavior can not be ignored", said Secretary of Commerce Ross. It was further noted in the denial order that ZTE was "repeatedly lying to BIS and other US law enforcement agencies and engaging in a cover-up scheme to destroy. remove, or sanitize evidence". 300 million of the agreement's penalty would be suspended for a probationary period of seven years.

According to Financial Times, the UK National Cyber Security Centre (NCSC) has sent a letter to telcos, Ofcom, and ZTE stating that the use of equipment from the Chinese manufacturer would create national security risks that "could not be mitigated effectively or practicably". The letter also warned that because ZTE is owned by the Chinese state, meaning it could be at risk from new laws that allow China to influence any companies and individuals that have "wide-ranging powers of compulsion". The Chinese company used a series of shell companies to sell its products in Iran, and after pleading guilty, it promised to terminate four senior employees and to discipline 35 others.

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The ZTE action comes amid rising trade tensions between the US and China, which could be affect Qualcomm beyond ZTE.

"ZTE made false statements to the US Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation". However, hardware and software aspects of those devices originated in the United States, which is a blatant violation of Iranian trade embargoes instituted by the USA government.

Obviously, it has the potential to severely impact ZTE's business in a negative way. This order was issued due to a breach of a settlement between ZTE and the U.S. government after ZTE was found violating Iran and North Korean sanctions. (NYSE:T), T-Mobile US Inc. Despite agreeing to do so, the Shenzhen based company undertook no further action than firing 4 senior employees, it admitted in March of this year. Although Commerce Department officials would not discuss the report, they said the department followed up in February.

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