EuroWire May 2016

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Transatlantic cable
May 2016 27
Telecommunications
The US embargo still in place against Iran
disrupts the global supply chain of a major
Chinese telecom equipment company
“ZTE, China’s largest listed telecommunications equipment
manufacturer, could face severe component supply problems
from this month, based on a reported plan by the US
government to slap export restrictions on the company for
alleged violations of longstanding American trade sanctions on
Iran.”
Writing in the South China Morning Post for 7th March, Bien Perez
anticipated by a scant day the US action against Zhongxing
Telecommunications Equipment Corp (Shenzhen, China).
E ective 8th March, the Bureau of Industry and Security (BIS) of
the Department of Commerce added the company and two of
its a liates – one in China, one Iran-based – to the BIS Entity List.
The USA imposes export restrictions and licence requirements
on those on its list, e ectively restricting their access to items
of US-origin and some others. The curbs apply to any company
worldwide that wants to ship American-made products to ZTE in
China. (“ZTE Faces US Export Restrictions Over Iran Surveillance
System Deal,” 7th March)
The action against ZTE was taken under a US embargo on trade
with Iran imposed in response to the seizure of the American
embassy in Tehran in 1979. Its export controls and sanctions are
separate from the international sanctions imposed on Iran over
its nuclear programme in 2006 and lifted in January 2016.
As reported by the legal issues site JDSupra, BIS investigators
claim to have obtained internal ZTE documents that provide
an overview of US export-control rules and describe the risks
for ZTE in doing business in sanctioned countries – as well as
recommendations for circumventing them. BIS alleges that ZTE
set up shell companies in order to conceal the company’s role in
transactions with Iran.
According to JDSupra, BIS cites one document noting that “the
biggest advantage [of this model] is that it is more e ective,
[making it] harder for the US Government to trace it or
investigate the real ow of the controlled commodities.”
BIS “took the unusual step” of making public these materials,
marked Top Secret and Highly Con dential by ZTE. (“US Export
Controls Restrictions Imposed on Chinese Telecommunications
Giant ZTE,” 11th March)
ZTE Corp is the world’s fth-largest telecom equipment and
systems company, behind only Ericsson, Huawei, Alcatel-Lucent
and Nokia Siemens. In laying out the rami cations of the BIS
designation, given ZTE’s market position, JDSupra said it expects
wide-ranging repercussions on customers and companies
throughout the global telecom supply chain. According to
the Wall Street Journal, ZTE sold nearly 50 million smartphones
worldwide in 2015. Bloomberg reported that ZTE depends on
American suppliers for 43 per cent of the inputs for the handsets
and networking equipment it makes in China, procuring
American goods worth more than $450 million per quarter.
Following the announcement of the BIS action against ZTE,
China’s Ministry of Commerce issued a public statement
expressing its “strong dissatisfaction and objection” to the USA
export restrictions.