13 April 2017
Restrictions on Exports of EAR-Regulated Goods to Two ZTE Entities Removed
The DOC’s Bureau of Industry and Security has issued a final rule removing two mainland Chinese companies from the list of entities restricted from receiving U.S. exports of goods controlled under the Export Administration Regulations. This rule also adds one mainland Chinese entity to the Entity List. These changes were effective as of 29 March.
BIS placed Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (and two other entities) on the Entity List on 8 March 2016, following its determination that they were involved in a scheme to establish, control and use a series of shell companies to illicitly re-export controlled items to Iran. BIS subsequently issued a temporary general licence that suspended these restrictions and restored the licence requirements, licence review policies and licence exceptions under the EAR that applied prior to 8 March to exports, re-exports and transfers (in-country) to these two entities.
BIS recently reached an agreement with ZTE Corporation and ZTE Kangxun that resulted in a substantial monetary penalty, intrusive independent monitoring, and additional suspended penalties that will be imposed if ZTE fails to meet its obligations or further violates U.S. export controls. As a result, BIS has concluded that these companies have performed their undertakings to the U.S. government in a timely manner and otherwise co-operated with the U.S. government in resolving this matter and is therefore removing them from the Entity List. This change eliminates the existing licence requirements in Supplement No. 4 to part 744 for exports, re-exports and transfers (in-country) to these entities.
However, BIS is adding to the Entity List a former CEO of ZTE Corporation who signed and approved the documents that described how ZTE planned and organised its illegal export scheme. For this person there is a licence requirement for exports, re-exports or transfers (in-country) of all items subject to the EAR and a licence review policy of presumption of denial. The licence requirement applies to any transaction in which items are to be exported, re-exported or transferred (in-country) to this person or in which this person acts as purchaser, intermediate consignee, ultimate consignee or end-user. In addition, no licence exceptions are available for exports, re-exports or transfers (in-country) to this person.