ZTE: U.S. export ban ‘unacceptable’

Chinese telecom firm ZTE says the Commerce Department’s latest embargo will “severely impact the survival and development” of the company as well as cause harm to its U.S.-based partners.    Chinese telecom firm ZTE Corp. is hitting out against what it considers “unfair” treatment from the U.S. government that could potentially put the company’s survival at stake.
   ZTE on Friday responded to the Commerce Department’s Bureau of Industry and Security once again barring U.S.-based individuals and corporations from exporting to ZTE, calling the reactivation of the ban “unacceptable.”
   “It is unacceptable that BIS insists on unfairly imposing the most severe penalty on ZTE even before the completion of investigation of facts, ignoring the continuous diligent work of ZTE and the progress we have made on export compliance and disregarding the fact that (1) ZTE self-identified the issues in the correspondence and self-reported by ZTE immediately; (2) the company has taken measures against the employees who might have been responsible for this incident; (3) corrective measures has been taken immediately; and (4) a prestigious U.S. law firm has been engaged to conduct independent investigation,” the firm said in a statement.
   The embargo stems from a March 2017 agreement under which ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after Commerce found it had illegally shipped telecommunications equipment to Iran and North Korea.
   The agreement, which ended more than a year of sanctions against ZTE, also stipulated that the company be subject to a suspended denial of export privileges for seven years, meaning that Commerce could lift the suspension if it found any further violations or if ZTE failed to live up to its side of the bargain.
   According to a statement from Commerce on Monday, BIS recently discovered that ZTE had made false statements to the agency in 2016 and continued to do so both during and after the settlement negotiations, which triggered the lifting of the export ban suspension.
   “ZTE made false statements to the U.S. 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,” said Commerce Secretary Wilbur Ross. “Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored.”
   For its part, however, ZTE claims that since the discovery of the violations in April 2016, the company has “continuously reflected on lessons from its past experience in Export Control Compliance and has attached great importance to Export Control Compliance. Within ZTE, compliance is regarded as the foundation and bottom line of the company’s operation.
   “ZTE has been working diligently on Export Control Compliance program and has invested tremendous resources in export compliance and has made significant progress since 2016,” the company added.
   ZTE also argued that the export ban will “severely impact the survival and development” of the company, as well as cause harm to its partners, including those based in the United States.
   Heightening the rhetoric even further, the company vowed to continue its efforts to “resolve the issue through communication,” but said it said it was “determined, if necessary, to take judicial measures to protect the legal rights and interests of our company, our employees and our shareholders, and to fulfill obligations and take responsibilities to our global customers, end-users, partners and suppliers.”
   The export ban comes shortly after President Donald Trump announced the administration’s intention to impose tariffs on roughly $50 billion in Chinese imports to the United States and subsequent threats of retaliation from China, but a senior BIS official told reporters on Monday that the two actions are not related.
   “The timing of this is somewhat unfortunate because it could make it seem like they’re connected,” the official said. “This is an enforcement action; it’s a regulatory action pursuant to an ongoing investigation that we discovered, by their admission, that they have presented, falsely, information to the U.S. government.”
   Trading in ZTE stock on the Hong Kong and Shenzhen exchanges has been suspended since the announcement. Shares on Monday closed at $25.60 Hong Kong (U.S. $3.26), giving the company a total market capitalization of roughly HK $125 billion.