Economy

US Bans American Companies From Selling Parts to Chinese Phone Maker ZTE

US Bans American Companies From Selling Parts to Chinese Phone Maker ZTE”

"ZTE made false statements to the US government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation", Commerce Secretary Wilbur Ross said in a written statement. But the Chinese company admitted in March that while it had fired the four senior employees, it had not disciplined or reduced bonuses to the 35 others. The company also made false statements during a reprieve it was given and then again during its probation.

The denial order against ZTE comes amid brewing tensions between the USA and China that have raised concerns of a trade war between the world's two biggest economies.

A senior official with the Commerce Department Bureau of Industry and Security told reporters that the ZTE decision was unrelated to the administration's threats to impose tariffs on Chinese imports, saying the actions against the Chinese company are part of an investigation. "And in worldwide commerce, truth is pretty important". From January 2010 to March 2016, the company shipped $32 million in USA cellular network equipment to Iran, and made 283 shipments of cell phones to North Korea, with the full knowledge of the highest levels of company management, officials said.

ZTE didn't respond to calls seeking comment that were made after business hours in China. "This will be devastating to the company, given their reliance on U.S. products and software", said Jacobson.

"This is going to tank their stock", Jacobson added. It has relied on USA companies including Qualcomm Inc, Microsoft Corp and Intel Corp for components. The five-year USA government investigation into ZTE's actions was first revealed in March 2016. After the USA placed export restrictions on ZTE in 2016 for Iran sanctions violations, the China's Ministry of Commerce and Foreign Ministry criticized the decision.

ZTE agreed in March of past year to plead guilty and pay as much as $1.2 billion for violating US laws restricting sale of American technology to Iran.

The commerce department initially probed ZTE's sales to Iran in 2016. The US government had allowed the company continued access to the USA market under the 2017 agreement. US companies could be banned from selling components to ZTE for up to seven years. It's estimated that 25-30% of ZTE's components come from U.S. companies, both in the company's networking gear and smartphone products.



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