On April 16, 2018, the Bureau of Industry and Security ("BIS") announced it was imposing a denial of export privileges on ZTE Corporation ("ZTE"). The denial of export privileges was in response to false statements made by ZTE in the wake of its March 2017 settlement agreement with BIS.1 In March 2017, ZTE agreed to a combined civil and criminal penalty of $1.19 billion for illegally shipping telecommunications equipment to Iran and North Korea, making false statements to the U.S. government, and obstructing justice. As part of this settlement, ZTE and BIS agreed to suspend a seven year denial of export privileges, but this suspension was predicated on ZTE complying with the terms of the settlement agreement.
ZTE was informed of the proposed activation of these export denials on March 13, 2018 when BIS notified ZTE it had determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to disciplinary actions ZTE said it had already taken against employees of the company. ZTE informed BIS these statements were false after BIS requested proof showing that the employee discipline had occurred. Citing a larger pattern of deception, false statements, and repeated violations, BIS has issued a denial order, which suspends the export privileges of ZTE until March 13, 2025. As part of the denial order, ZTE is now a denied party and is prohibited from participating in any way in any transaction subject to the EAR. Additionally, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person, which now includes ZTE.
The Denial Order is available at: https://www.commerce.gov/sites/commerce.gov/files/zte_denial_order.pdf.
Footnotes
[1] For more information on ZTE's original settlement agreement, please see Torres Law's previous article From A to ZTE: A Review of Lessons Learned from the ZTE Case. This article is available at: http://www.torrestradelaw.com/posts/From-A-to-ZTE%3A-A-Review-of-Lessons-Learned-from-the-ZTE-Case/119.
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