Bureau of Industry and Security Imposes Denial of Export Privileges Against ZTE

by Foley Hoag LLP

Summary and Action Alert

On Monday, April 16, 2018, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced that it was imposing a denial of export privileges against Zhongxing Telecommunications Equipment Corporation of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”).

The denial order will effectively prohibit all persons worldwide from providing ZTE with U.S.-origin parts, components or technology, even if they have already been exported outside the United States. It also prevents ZTE or other parties from seeking licenses from the Department of Commerce that would permit these exports or transfers to occur. The denial order went into effect immediately upon issuance, with no grace period for transactions planned or pending.

Any U.S. or global suppliers of components, software, or services to ZTE, should immediately ascertain whether their transactions with ZTE are prohibited by the denial order, and act accordingly. All transactions “subject to the Export Administration Regulations” of the United States are prohibited if they involve ZTE. Consequently, distributors, subsidiaries, and agents, wherever located, are covered by this prohibition if the transaction involves U.S.-origin items or items that were exported from the U.S.


The denial order follows ZTE’s of $1.19 billion settlement with U.S. authorities last year for illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice. In addition to the monetary penalties, as part of the settlement, ZTE also agreed to a seven-year suspended denial of export privileges, which could be activated if any aspect of the settlement agreement was not met and/or if ZTE committed additional violations of the Export Administration Regulations (EAR). The settlement agreement also required that during the seven-year probationary period, ZTE make truthful disclosures of any information requested by BIS.

BIS has now uncovered that ZTE violated the settlement agreement by making false statements to BIS during the settlement negotiations in 2016, and even during the probationary period in 2017. Specifically, despite representing that it had taken or would take action against the employees that had engaged in the illegal conduct, in reality, ZTE never issued letters of reprimand to these employees, and paid all but one of the employees a full bonus. ZTE’s false statements were only discovered after BIS requested information and documentation showing that employee discipline had occurred.

In activating the suspended denial of ZTE’s export privileges under the settlement agreement, the Acting Assistant Secretary of Commerce for Export Enforcement found that ZTE’s “provision of false statements to the U.S. Government, despite repeated protestations from the company that it has engaged in a sustained effort to turn the page on past misdeeds, is indicative of a company incapable of being, or unwilling to be a reliable and trustworthy recipient of U.S.-origin goods, software, and technology.”

The Effect of the Denial Order

The denial order went into effect immediately, and is very broadly worded. As of Monday, April 16, ZTE can no longer – directly or indirectly – participate in any way in any transaction involving any commodity, software or technology exported or to be exported from the United States that is subject to the EAR. In addition, ZTE may not engage in any activity subject to the EAR, which means it cannot obtain or apply for any export licenses to seek exceptions to the export denial order.

At the same time, companies and individuals worldwide are prohibited from engaging in any transaction subject to the EAR with ZTE, including:

  • Exporting or re-exporting to or on behalf ZTE any item subject to the EAR;
  • Taking any action that facilitates the acquisition by ZTE of the ownership, possession, or control of any item subject to the EAR that has been or will be exported from the United States;
  • Taking any action to acquire from ZTE any item subject to the EAR that has been exported from the United States;
  • Engaging in any transaction to service any item subject to the EAR that has been or will be exported from the United States and which is owned, possessed or controlled by ZTE.


The full text of the denial order can be found here. Additional information regarding ZTE’s settlement with U.S. authorities can be found at the links below:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley Hoag LLP | Attorney Advertising

Written by:

Foley Hoag LLP

Foley Hoag LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.