The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced yesterday that Chinese telecommunications company, ZTE, has been banned from purchasing goods from U.S. companies. This order was issued due to a breach of a settlement between ZTE and the US government after ZTE was found violating Iran and North Korean sanctions.

In 2017, the U.S. government entered into a $1.19 billion settlement agreement with ZTE regarding their violation of sanctions by selling Iran and North Korea goods originating from the United States. 300 million of the agreement's penalty would be suspended for a probationary period of seven years.

Under the terms oft he settlement, ZTE agreed lo a record-highcombined civil and criminal penalty of $1.19 billion, after engaging in a multi-year conspiracy to violate the U.S. trade embargo against Iran to obtain contracts to supply, build, operate, and maintain telecommunications networks in Iran using U.S.-origin equipment, and also illegally shipping telecommunications equipment to North Korea in violation of the Export Administration Regulations (15 C.F.R. Parts 730-774 (2017)) ("EAR" or the "Regulations"). 

In addition to the monetary penalties, ZTE agreed to perform audits and to make truthful disclosures to federal investigators for the seven year probationary period. Failure to comply with this agreement would cause the outstanding 300 million to become immediately due and an activation of a denial order that would prevent ZTE from purchasing U.S. goods.

According to Secretary of Commerce Wilbur L. Ross, Jr., ZTE made false statements to BIS in 2016 during the settlement agreement and later when an update was requested by the U.S. government. As part of a requested update, ZTE stated that they had made disciplinary action against ZTE employees who were involved in the selling of goods to Iran and North Korea.

Later admissions indicate that the reported actions never took place and that all of the employees, except for one, earned their bonuses. It was further noted in the denial order that ZTE was "repeatedly lying to BIS and other U.S. law enforcement agencies and engaging in a cover-up scheme to destroy. remove, or sanitize evidence."

According to the press release, this denial order against ZTE is a regulatory action and has nothing to do with the ongoing trade war between the U.S.A and China.

UK's NCSC warns against using ZTE equipment

Hot on the heels of the United States' denial order, the United Kingdom's National Cyber Security Centre has issued a warning to UK telecommunication organizations that the use of ZTE telecommunications equipment is a national security risk.

Dr Ian Levy, Technical Director of the National Cyber Security Centre said:

“NCSC assess that the national security risks arising from the use of ZTE equipment or services within the context of the existing UK telecommunications infrastructure cannot be mitigated."

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