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Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

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Richard Bistrong Contributing Editor 

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Monday
Apr162018

U.S. hits ZTE with ‘denial of export privileges’ for violating sanctions settlement

The U.S. Department of Commerce Monday imposed a denial of export privileges against ZTE and a related company for seven years for failing to comply with settlement terms in an earlier sanctions case.

Monday's action means American companies are banned from selling components to ZTE and ZTE Kangxun Telecommunications Ltd. Both are based in Shenzhen, China.

Before the ban, ZTE was buying from American companies about 30 percent of the components used in its networking gear and smartphones, according to Reuters.

In 2017, ZTE paid $1.19 billion to settle criminal and civil charges for illegally shipping telecommunications equipment to Iran and North Korea. ZTE was also accused of making false statements and obstruction for lying to U.S. authorities and destroying export records.

ZTE -- China’s second-biggest maker of telecom equipment -- is also known as Zhongxing Telecommunications Equipment Corporation.

As part of the 2017 settlement, ZTE agreed a seven-year suspended denial of export privileges, "which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations."

In the 2017 settlement, ZTE promised to fire four senior employees and discipline 35 others by reducing their bonuses or reprimanding them.

ZTE admitted in March that it fired the four senior employees but didn't take action against the others, Reuters said.

The Commerce Department said Monday "that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand."

Secretary of Commerce Wilbur Ross said, “ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored.”

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Richard L. Cassin is the publisher and editor of the FCPA Blog.