News / Asia

    US Commerce Department to Place Restrictions on China's ZTE

    FILE - People are seen gathered at a ZTE company booth at the Mobile World Congress in Barcelona, Spain, Feb. 26, 2014.
    FILE - People are seen gathered at a ZTE company booth at the Mobile World Congress in Barcelona, Spain, Feb. 26, 2014.
    Reuters

    The U.S. Commerce Department is set to place export restrictions on Chinese telecoms equipment maker ZTE Corp for alleged violations of 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 American-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.

    The company can appeal against the action. ZTE, based in Shenzhen, said in a statement on Sunday that it was aware of media reports on U.S. export restrictions.

    "ZTE is highly concerned about recent media reports relating to a U.S. Department of Commerce investigation," the company said. "ZTE has been working with associated U.S. government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns."

    Alleged violations

    The Commerce Department investigated ZTE for alleged export-control 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 technology companies to Iran's largest telecoms carrier, Telecommunication Co of Iran (TCI), and a unit of the consortium that controls it.

    The U.S. companies, 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 the companies still do business with ZTE.

    Washington has long banned the sale of United States-made technology 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 in violation of U.S. sanctions.

    Commerce Department investigators obtained internal ZTE documents - some of which had been marked by the company as "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 implemented that scheme. The ZTE statement did not provide comment relating to the documents.

    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."

    Business impact

    What effect the new export restrictions will have on ZTE's 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.... Lots of chips or software used in the products of our company are from U.S. suppliers."

    One of ZTE's websites also states that several leading U.S. technology 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 immediately to requests comment.

    The undated internal ZTE document also describes a proposal overseen by the company's legal department that describes ways to export American products subject to U.S. sanctions by using shell companies to avoid getting caught.

    "The biggest advantage" of one method is that it will make it "harder for the U.S. government to trace it or investigate the real flow of the controlled commodities", the document states.

    In its planned action against ZTE, the Commerce Department cites the proposal, stating that the company "planned and organized a scheme to establish, control and use a series of 'detached' companies to illicitly re-export controlled items to Iran in violation of U.S. export control laws". It is not clear if the alleged scheme was implemented.

    'Top secret'

    Another internal ZTE document from August 2011 that discusses "U.S. export control risks" facing the company allegedly was signed by several top ZTE officials, including Shi Lirong, its president.

    The document, marked by the company "Top Secret" and "No spreading abroad without permission of ZTE", begins "Dear company leaders".

    It states that ZTE "has ongoing projects in all five major embargoed countries - Iran, Sudan, North Korea, Syria and Cuba", adding that "all of these projects depend on U.S.-procured items to some extent, so export control obstacles have arisen".

    The document goes on to cite "other risks" to ZTE, including its operations in the United States.

    "R&D employees at the U.S. Research Centers often travel between China and the U.S., carrying R&D data," it states, in an apparent reference to research and development. "This already severely violates the law."
    The document does not specify what law may have been violated.

    The company "needs to take preventative measures immediately, otherwise will face the risk of being investigated anytime," the document states.

    The document also states that ZTE's Iran project "can potentially put us at risk of being put on the Blacklist by the U.S.," and that such an eventuality could leave the company facing "the risk of losing the supply chain of U.S. products".

    ZTE Corp is one of the world's largest telecom equipment makers with operations in 160 countries, according to its website. It also is a major manufacturer of mobile handsets. Founded in 1985, its shares trade on both the Hong Kong and Shenzhen stock markets.

    Besides ZTE, the export curbs will apply to two of its Chinese affiliates, ZTE Kangxun Telecommunications Ltd and Beijing 8-Star, and an Iranian company, ZTE Parsian.

    You May Like

    Hope Remains for Rio Olympic Games

    Facing a host of problems, Rio prepares for holding the games but experts say some risks, like Zika, may not be as grave as initially thought

    IS Use of Social Media to Recruit, Radicalize Still a Top Threat to US

    Despite military gains against IS in Iraq and Syria, their internet propaganda still commands an audience; US officials see 'the most complex challenge that the federal government and industry face'

    ‘Time Is Now’ to Save Africa’s Animals From Poachers, Activist Says

    During Zimbabwe visit, African Wildlife Foundation President Kaddu Sebunya says poaching hurts Africa as slave trade once did

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Ivorian Chocolate Makers Promote Locally-made Chocolatei
    X
    July 29, 2016 4:02 PM
    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Ivorian Chocolate Makers Promote Locally-made Chocolate

    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100 percent Ivorian chocolate bar at a time.
    Video

    Video Tesla Opens Battery-Producing Gigafactory

    Two years after starting to produce electric cars, U.S. car maker Tesla Motors has opened the first part of its huge battery manufacturing plant, which will eventually cover more than a square kilometer. Situated close to Reno, Nevada, the so-called Gigafactory will eventually produce more lithium-ion batteries than were made worldwide in 2013. VOA's George Putic reports.
    Video

    Video Polio-affected Afghan Student Fulfilling Her Dreams in America

    Afghanistan is one of only two countries in the world where children still get infected by polio. The other is Pakistan. Mahbooba Akhtarzada who is from Afghanistan, was disabled by polio, but has managed to overcome the obstacles caused by this crippling disease. VOA's Zheela Nasari caught up with Akhtarzada and brings us this report narrated by Bronwyn Benito.
    Video

    Video Hillary Clinton Promises to Build a 'Better Tomorrow'

    Democratic presidential candidate Hillary Clinton urged voters Thursday not to give in to the politics of fear. She vowed to unite the country and move it forward if elected in November. Clinton formally accepted the Democratic Party's nomination at its national convention in Philadelphia. VOA national correspondent Jim Malone has more.
    Video

    Video Trump Tones Down Praise for Russia

    Republican presidential candidate Donald Trump is toning down his compliments for Russia and Vladimir Putin as such rhetoric got him in trouble recently. After calling on Russia to find 30.000 missing emails from rival Hillary Clinton, Trump told reporters he doesn't know Putin and never called him a great leader, just one who's better than President Barack Obama. Putin has welcomed Trump's overtures, but, as Zlatica Hoke reports, ordinary Russians say they are not putting much faith in Trump.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.

    Special Report

    Adrift The Invisible African Diaspora