Chinese cellphone equipment manufacturer ZTE has just agreed to plead guilty over violating American laws against selling US technology to Iran. Now, those specifics might not appear to add up, but you have to look a little closer.
You see, ZTE is actually the fourth-largest smartphone vendor in the United States. More importantly, the Chinese telecom gets roughly one-third of its components from American-based companies like Qualcomm, Intel, and Microsoft. Also, the company sells handsets to the major telecom players in America: T-Mobile, Sprint, and AT&T.
However, the company has admitted to shipping some of their products—which contain parts made in the United States—to customers in Iran, either directly or via other companies. Furthermore, ZTE conducted these transactions over the course of six years without first getting proper licensing. US officials say that ZTE knowingly shipped approximately $32 million worth of American goods to Iran, misleading US authorities about its compliance to American laws in the process.
As such, US Commerce Secretary Wilbur Ross comments, “With this action, we are putting the world on notice. Improper trade games are over with,” calling ZTE’s actions “a brazen disregard for our laws.”
In response, ZTE Chairman and CEO, Zhao Xianming, comments, “ZTE acknowledges the mistakes it made, takes responsibility for them and remains committed to positive change in the company. Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company.”
This action may be only the latest in a recent stint of near-feuds between the US and China in regards to technology policy. The action has also offered a chance for President Trump to stick to his guns about his commitment to administering stricter US sanctions.
Ross goes on to say, “We are putting the world on notice: The games are over. Those who flout our economic sanctions and export control laws will not go unpunished — they will suffer the harshest of consequences.”
At the end of the day, then, ZTE has agreed to pay $892 million in US fines and penalties. In addition, the Chinese telecom giant has also agreed to pay $300 million, suspended over a period of seven years, so they will hold up their end of a new agreement which involves an independent compliance monitor.