ZTE 'may face penalties' over U.S.-imposed export restrictions on Iran deals

Updated 2017-02-15 09:21:25 Global Times

Chinese telecommunication giant ZTE Corp announced Tuesday that it is negotiating with the U.S. government on the settlement of export restrictions imposed by the U.S. Department of Commerce, the outcome of which may result in penalties for the company.

"Currently, the company is negotiating with the U.S. Department of Commerce, the U.S. Department of Justice and the U.S. Department of Treasury on the settlement issues, the outcome of which is expected to result in penalties (including but not limited to a fine and other relevant liabilities under U.S. law)," the company said in a statement on its website.

It said that the outcome remains uncertain, but the penalties will likely have a material impact on the company's financial conditions and operating results.

In March 2016, the U.S. Department of Commerce decided to add ZTE and three subsidiaries - ZTE Kangxun Telecommunications, ZTE Parsian and Beijing 8-Star International Co - to the Entity List for alleged export-control violations. Pursuant to the decision, U.S. companies and suppliers of U.S. products and technologies are required to apply for a license before exporting related products and technologies to ZTE. The restrictions took effect on March 8, 2016.

Reuters reported in March 2016 that the company shipped millions of dollars worth of hardware and software from U.S. technology companies to Iran.

The day after the announcement from the U.S. Department of Commerce, Chinese Ministry of Commerce expressed strong dissatisfaction and stern objections.

The ministry said that ZTE has always actively taken part in international operations and contributed tens of thousands of jobs to the U.S. by cooperating with hundreds of corporations in the country.

The negotiations between ZTE and the U.S. government departments will be affected by the overall China-U.S. relationship, domestic news portal caixin.com reported Tuesday.

Improper handling of the issue may lead to trade conflicts between the two countries, but the U.S. side will not likely worsen the issue as the two countries are interdependent, according to the caixin.com report.

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