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ZTE ceases major operating activities following export sanctions

Chinese telecommunications equipment and systems supplier ZTE has ceased its major operating activities following a denial of export privileges against the company from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS).

The action from BIS, which prevents US components being re-sold to the company, followed a 2017 agreement with ZTE to a combined civil and criminal penalty and forfeiture of $1.19 billion for shipping telecommunications equipment over a six-year period to Iran and North Korea during an export ban. The company is then said to have made false statements about the activity, obstructing justice by preventing disclosure to and ultimately misleading the U.S. government (see U.S. banned from selling to ZTE after activation of export denial).

In a declaration to the Hong Kong Stock Exchange, ZTE stated that as of now it ‘maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations.’ It is currently communicating with the relevant U.S. government departments to try to facilitate the modification or reversal of the Denial Order by the U.S. government and ‘forge a positive outcome’.

The news came just a day after Oclaro officially announced its suspension of shipments to the company. In a statement following the release of its latest financial results, Greg Dougherty, CEO of Oclaro said: ‘As a result of the U.S. Department of Commerce recently re-imposing export sanctions on ZTE, we have temporarily suspended all shipments to, and activities with, ZTE. Despite the loss of ZTE as a greater than 10 per cent customer for an indefinite period, we continue to believe our solid financial model and tight expense controls, when coupled with our highly differentiated products, will allow us to continue to demonstrate strong financial performance.’

ZTE said that it will continue to make announcements in relation to the export sanctions ‘as soon as practicable.’

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