Secretary of Commerce Wilbur Ross has announced that the US Department of Commerce’s Bureau of Industry and Security (BIS) imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China, and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China, collectively known as ZTE.

BIS is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items.

In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the US government.  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).

The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken.  ZTE’s false statements only were reported to the US government after BIS requested information and documentation showing that employee discipline had occurred.

“ZTE made false statements to the US 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 Ross.

The false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.

“ZTE misled the Department of Commerce,” said Ross. “This egregious behavior cannot be ignored.”

Denial Orders are issued by the Assistant Secretary for Export Enforcement of the Bureau of Industry and Security, denying the export privileges of a company or individual. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. 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.