United States takes technology battle up a notch with ZTE export ban

US bans American exports to Chinese phone maker ZTE

In response, the Department of Commerce instituted a full ban on any USA exports to ZTE specifically for the next seven years.

The U.S. action, first reported by Reuters, could be devastating to ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes networking gear and smartphones.

The news comes after ZTE a year ago pled guilty in federal court to subvert US sanctions in Iran. The Department of Commerce warned that ZTE could be banned from sourcing from its USA suppliers and it avoided that by paying $890 million in fines and penalties. "This egregious behavior can not be ignored", Secretary Ross said. ZTE did fire the four execs, but it failed to institute any punishment for those 35 employees. Four senior managers and 35 members of staff were supposed to either be shown the door or had their bonuses removed, though the firm apparently paid the full amount to the nefarious employees further infuriating Ross.

Under terms of the ban, USA companies can not export prohibited goods, such as chip sets, directly to ZTE or via another country, beginning immediately. Acacia Communications Inc. shares fell by 34.7%, a drop influenced by the fact that almost a third of the company's 2017 revenue came from ZTE.

ZTE didn't respond to calls seeking comment that were made after business hours in China.

ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.

Other smaller or less-well-known American companies have been negatively affected by the ban. In addition to these monetary penalties, ZTE also 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 (EAR).

This is a regulatory action and is unrelated to any ongoing trade-related actions.

"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 Secretary of Commerce Ross. US versions of ZTE phones were found to have a backdoor in 2012.

Allowing Huawei, ZTE, and other related entities access to US government communications would be inviting Chinese surveillance into all aspects of our lives.



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