The US Commerce Department is set to place export restrictions on Chinese telecoms equipment maker ZTE Corp for alleged violations of U.S. export controls on Iran, according to documents seen by Reuters.
The restrictions will make it difficult for the company to acquire U.S. products by requiring ZTE's suppliers to apply for an export licence before shipping any American-made equipment or parts to ZTE. According to a Commerce Department notice that will be published next week in the U.S. Federal Register, the licence applications generally will be denied.
The restrictions will take effect Tuesday, Reuters has learned, and apply to any company world-wide that wants to ship American-made products to ZTE Corp in China. Those companies are not the target of the export curbs on ZTE.
"This is a significant new burden on trade with ZTE," a senior official at the Commerce Department told Reuters. The official declined to comment on whether the U.S. government might take further action against ZTE.
The company can appeal against the action.
ZTE, based in Shenzhen, said in a statement on Sunday that it was aware of media reports on U.S. export restrictions.
"ZTE is highly concerned about recent media reports relating to a U.S. Department of Commerce investigation," the company said. "ZTE has been working with associated U.S. government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns."
The Commerce Department investigated ZTE for alleged export-control violations following reports by Reuters in 2012 that the company had signed contracts to ship millions of dollars worth of hardware and software from some of America's best-known technology companies to Iran's largest telecoms carrier, Telecommunication Co of Iran (TCI), and a unit of the consortium that controls it.
The U.S. companies, which included Microsoft Corp, IBM, Oracle Corp and Dell Inc, have all said they were not aware of the Iranian contracts. It is not clear if any of the companies still do business with ZTE.
Washington has long banned the sale of United States-made technology products to Iran. The Commerce Department's investigation focused on whether ZTE had acquired American products through front companies and then shipped them to Iran in violation of U.S. sanctions. Commerce Department investigators obtained internal ZTE documents - some of which had been marked by the company as "Top Secret" - outlining an alleged sanctions-busting scheme. Reuters reviewed some of the documents.
The senior Commerce Department official declined to comment on whether ZTE had implemented that scheme.
The ZTE statement did not provide comment relating to the documents.
The day after the first Reuters article was published in March 2012, a ZTE spokesman said the company would "curtail" its business in Iran. The company later issued a statement saying: "ZTE no longer seeks new customers in Iran and limits business activities with existing customers." What effect the new export restrictions will have on ZTE's global business is not clear.