US Commerce Department To Place Restrictions On Exports To China’s ZTE

The U.S. Commerce Department is set to place restrictions on exports of American products by the Chinese telecommunications equipment maker ZTE Corp. for allegedly violating U.S. export controls related to Iran, according to documents seen by Reuters. The restrictions will take effect Tuesday and will require ZTE’s American suppliers to apply for an export license before shipping anything to ZTE in China.

The license applications generally will be denied, according to the restrictions imposed on ZTE and three affiliates. The export curbs apply to any company worldwide that wants to ship U.S. products to ZTE in China.

“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.

A representative of ZTE, based in Shenzhen, China, could not be reached for immediate comment. The company can appeal the action.

The Commerce Department investigated ZTE after reports by Reuters in 2012 that the company had signed contracts to ship hardware and software worth millions of dollars from some of America’s best-known tech firms to Iran’s largest telecom carrier, Telecommunication Co of Iran (TCI), and a unit of the consortium that controls it.

The U.S. product makers — including Dell Inc., Hewlett-Packard Co., International Business Machines Corp., Microsoft Corp. and Oracle Corp. — all have said they were not aware of the Iranian contracts.

Washington has long banned the sale of U.S.-made tech products to Iran.

A day after the first Reuters article was published, a ZTE representative said the company would “curtail” its business in Iran. The firm later issued a statement saying, “ZTE no longer seeks new customers in Iran and limits business activities with existing customers.”

What effect the new export restrictions will have on ZTE’s business is unclear.

The company has stated on one of its websites that some of the largest U.S. tech companies, including Honeywell, IBM, Intel and Microsoft, “are all key strategic partners of ZTE.”

A Microsoft representative said the company had a licensing agreement with ZTE but could not confirm whether the Chinese firm purchases other products. The other U.S. companies did not respond to requests for immediate comment.

ZTE is one of the world’s largest telecom equipment makers with operations in 160 countries, according to its website. Founded in 1985, its shares trade on both the Hong Kong and Shenzhen Stock Exchanges.

Besides ZTE Corp., the export curbs will apply to two Chinese affiliates, ZTE Kangxun Telecommunications Ltd. and Beijing 8-Star, as well as an Iranian company, ZTE Parsian.