ZTE employees asked to learn US laws and pass compliance test

The Chinese smartphone maker was earlier this week hit with seven-year-long export restrictions by the US.

ZTE is stepping up compliance management inside the company after the Chinese telecom equipment vendor was found by the US to have breached its probation agreement to export restrictions.

The company is trying to strengthen its compliance management by requiring every employee to relearn European and American laws and regulations, as well as knowledge such as anti-bribery. Only those who have achieved the full marks of 100 points are able to pass the internal compliance examination inside the company, a local Chinese report said on Thursday, citing people familiar with the matter.

Monday's export ban from the US Department of Commerce came after the company was found in violation of its settlement terms with the US government.

In March 2017, ZTE had agreed to pay a combined civil and criminal penalty and forfeiture of $1.19 billion for its illegal shipments of telecom equipment to Iran and North Korea. ZTE had also agreed seven-year suspended denial of export privileges, which could be activated when any parts of the agreement were not met or any new violations were found.

This week, the US alleged that ZTE lied to the Bureau of Industry and Security (BIS) about disciplinary actions supposedly enforced on senior employees relating to the illegal shipments, with ZTE rewarding staff and senior management who had engaged in illegal conduct instead of reprimanding them.

Read this: Who's hurt by the ZTE ban? US consumers and businesses

The resulting seven-year-long sanction could be a major blow to ZTE as its major carriers and smartphone businesses have rested on supplies from US companies including processors, chipsets, and the Android operating system.

High-level company executives are all lobbying for a settlement of the sanction while most ordinary employees are working as normal, except the compliance test requirements, according to the report.

ZTE is actively seeking solutions and will disclose the progress of the incident, representatives of the company said in response to queries from its investors, who said operations within the company are affected but ZTE is trying its best to overcome the issue.

Chinese reports also said ZTE has started to confirm that every single production process, supply chains, and other activities do not involve the use of products from US companies in a move to comply with the sanction.

China International Capital Corporation has said ZTE's inventory of parts are only enough for one to two months' consumption, the report said, and if it could not conciliate with the US government for a settlement within the period, normal production and sales of telecom equipment and smartphones will be affected.

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