On April 16, 2018, the US Department of Commerce’s Bureau of Industry and Security (BIS) announced that they were re-imposing a denial of export privileges against Chinese tech giant, ZTE.
The news follows a previous action from 2017 where ZTE (aka Zhongxing Telecommunications Equipment Corporation) pled guilty to charges of conspiring to violate U.S. sanctions surrounding the shipment of U.S. origin goods to Iran and North Korea from 2010 to 2016. In that case, ZTE admitted to knowingly thwarting the law by intentionally disguising shipments.
They were ultimately charged with violating U.S. sanctions, obstruction of justice, and making “a materially false statement.” The result was a USD $1.19 billion fine—the single largest export violation in history.[i]
The U.S. government ultimately lessened the financial penalty by $300 million, and suspended the seven-year trade debarment, so long as the offending employees were punished (among other stipulations).
And that should have been the end of it.
Out of the Export Sanctions Frying Pan…
Except that it was not. Incredibly, ZTE recently fell afoul of the law again. Instead of reprimanding those involved with the initial illegal conduct, they were paid full bonuses.[ii] Upon discovery, the U.S. Department of Commerce responded by re-imposing the seven-year export ban that forbids U.S. companies from engaging in business with ZTE.
The ensuing fallout for ZTE has been severe. Following the April 16 announcement, the company’s shares were suspended from trading in Hong Kong and Shenzen, and the debarment, the company says, could “threaten its very survival.”[iii]
Also impacting ZTE is a warning from the U.K.’s National Cyber Security Center to phone carriers against using ZTE equipment, citing threats to national security.[iv]
The Story Continues
What will ultimately happen to ZTE remains unclear, for the story is still unfolding—due, in part, by the Trump administration’s ongoing trade negotiations with China.[v] But regardless of ZTE’s ultimate fate, there’s a lesson to be learned over and above not willfully breaking U.S. export laws:
If caught, be sure to live up to the agreement made with the U.S. government to ensure those who broke the law are punished. If corrective measures have also been mandated, make sure they’re implemented swiftly and to the letter.
Or maybe just don’t break the law in the first place.
[i] US hits major Chinese tech firm with export ban. CNN Money https://money.cnn.com/2018/04/17/technology/zte-china-us-phones-ban/index.html. Accessed May 7, 2018.
[ii] Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government. US Department of Commerce https://www.commerce.gov/news/press-releases/2018/04/secretary-ross-announces-activation-zte-denial-order-response-repeated. Accessed May 7, 2018.
[iii] China’s ZTE slams U.S. ban, says company’s survival at risk. Reuters. https://www.reuters.com/article/us-usa-china-zte/chinas-zte-slams-u-s-ban-says-companys-survival-at-risk-idUSKBN1HR085. Accessed May 7, 2018.
[iv] China’s ZTE ‘poses risk to UK security’. BBC News. https://www.bbc.com/news/technology-43784990. Accessed May 7, 2018.
[v] China’s ZTE to US: Let us buy American technology again. CNN Tech. https://money.cnn.com/2018/05/07/technology/zte-china-us-trade-tech-ban/index.html. Accessed May 7, 2018.