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ZTE facing US export restrictions after US kit sales to Iran: Report

Chinese telecommunications hardware maker ZTE will have to make do without equipment from the United States if reports of export restrictions on American companies are correct.
Written by Chris Duckett, Contributor

The sale of equipment to Iran looks set to land ZTE in hot water, with Reuters reporting that the Chinese telecommunications hardware maker will this week have to face export restrictions on US products from the United States Department of Commerce.

Reuters said the restrictions will be global, and any company will need to apply for a licence to ship kit to ZTE, with most applications set to be rejected.

The Commerce Department's Bureau of Industry and Security (BIS) is charged with looking after US sanctions against Cuba, Iran, North Korea, Sudan, and Syria.

The BIS points out on its website that the 2015 deal reached last year between Iran and the United States, China, France, Russia, the United Kingdom, and Germany to lift sanctions in return for Iran not developing a nuclear weapon does not change any existing sanctions.

"The parameters announced on April 2, 2015, for a Joint Comprehensive Plan of Action (JCPOA) by the P5+1 and Iran do not relieve, suspend, or terminate any of the export and other controls in the Export Administration Regulations (EAR) pertaining to Iran or any other country," the BIS said.

"The parameters provide a path for sanctions on Iran to be suspended and eventually terminated in exchange for IAEA [International Atomic Energy Agency]-verified implementation by Iran of its key nuclear commitments.

"As of today and until further notice, all EAR controls pertaining to Iran remain in place, and will continue to be vigorously enforced."

ZTE can appeal the decision, the report said.

This is not the first time that ZTE has found itself in trouble after doing business in Iran. Following a 2012 investigation by the FBI and Commerce Department, among others, Cisco ended its sales partnership with ZTE. At the time, ZTE was alleged to have set up a network of sub-companies to illegally export products from Microsoft, HP, Oracle, Dell, Cisco, and Symantec to Iran.

In its October 2012 earnings report, ZTE posted a $317 million third-quarter loss compared to a $47 million profit at the same time a year prior. The company said in its earnings that it was "adversely affected" by the US investigations.

Later in 2012, fellow Chinese telco hardware manufacturer Huawei was accused of attempting to supply embargoed Hewlett-Packard equipment to an Iranian mobile network operator.

ZTE also found itself embroiled in a Mongolian corruption probe in 2013 following the arrest of a Mongolian tax official who handled ZTE's tax affairs.

In its latest set of results, ZTE said its operating profit would top 1 billion yuan, up 1,632 percent year on year.

The company also attributed its record growth to the optical transmission and optical access systems investment that was made by China's leading carriers, and the increased sale of its high-end routers to international government and corporate customers.

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