ZTE Will Pay Record Fine for Sales to Iran, North Korea

Chinese smartphone maker ZTE has agreed to pay US$892 million to the USA government for illegally selling networking technology to Iran.

An official who requested anonymity to discuss the terms of the agreement said it was also largest Justice Department criminal fine in an export control or sanctions case. ZTE also faces a combined penalty of $1.19 billion; BIS will suspend $300 million of this obligation, which ZTE will be required to pay if it violates the settlement agreement.

The Chinese company had been winning contracts to build Iranian cellular and landline networks and was allegedly trying to hide the illegal technology shipments.

The department said the company had illegally shipped sensitive USA -made equipment to Iran.

Shipped items included routers, microprocessors and servers controlled under export regulations for security, encryption and anti-terrorism reasons.

The settlement allowed ZTE, the fourth-largest smartphone vendor in the US, to avoid a cutoff of USA components that had been imposed by the Commerce Department in March 2016.

ZTE used third-party companies to hide the export of USA components to the sanctioned countries, and "packaged the United States items with its own self-manufactured items to hide the US-origin goods", and did not include the U.S. items on the customs declaration forms.

If you weren't particularly aware, the International Emergency Economic Powers Act now restricts the shipment of US-made technology to countries like Iran and North Korea.

The agreement caps a year of uncertainty for the Shenzhen-based company, which in March 2016 was placed on a list of entities with which USA suppliers could not work without a license.

"ZTE acknowledges the mistakes it made, takes responsibility for them, and remains committed to positive change in the company", ZTE Chairman and Chief Executive Zhao Xianming said in a statement.

The denial order is key to keeping ZTE in line, said Eric Hirschhorn, former Under Secretary at the Commerce Department, who was involved in the investigation. ZTE must also work with a monitor for three years to make sure they comply with export rules. "Instituting new compliance-focused procedures and making significant personnel changes has been a top priority for the company".

The offences occured between January 2010 and January 2016, the US Justice Department said.

It will pay a further $100.9 million to the department of treasury's office of foreign assets control (OFAC).

One of the world's biggest telecommunications gear makers and the fourth-largest smartphone vendor in the US, ZTE sells handset devices to US mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.

  • Rogelio Becker