16 July 2018
Export Ban on Major Mainland Chinese Telecom Company Lifted
The U.S. Department of Commerce announced on 13 July that it has lifted a ban on exports to Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE). The DOC took this step after ZTE fulfilled several requirements, including paying a US$1 billion penalty, replacing its entire board of directors and senior leadership, and placing an additional US$400 million in suspended penalty money in escrow. ZTE previously paid US$892 million in penalties to the United States under a March 2017 settlement agreement.
Earlier this year the DOC determined that ZTE had violated that agreement, which settled charges that ZTE had committed hundreds of U.S. sanctions violations involving shipments to Iran and North Korea, by making false statements about the steps it took to discipline employees. The DOC responded by issuing a seven-year ban on exports to ZTE but President Trump subsequently agreed to a mainland Chinese request to reconsider. That decision has elicited substantial opposition from U.S. lawmakers on both sides of the aisle, and legislation to limit the president’s ability to take such action is under consideration in the House and Senate.
In addition to the steps outlined above, ZTE has agreed to retain for ten years a team of special compliance co-ordinators selected by and answerable to the DOC who will monitor ZTE’s compliance with U.S. export control laws on a real-time basis. The DOC has also issued a ten-year denial of export privileges that has been suspended but can be activated in the event of additional violations.
A department press release states that in total these are “the harshest penalties and strictest compliance measures ever imposed in such a case.” They will also set “a new precedent for monitoring to assure compliance with U.S. law” that “vastly improves the speed with which the Department of Commerce can detect and deal with any violations.”