The United States Department of Commerce (DOC) has just announced a ban on USA exports to ZTE, which means that the Chinese manufacturer will no longer be able to use technology or components from companies such as Dolby or Qualcomm, including the renowned Snapdragon processors.
The US action also comes amidst a brewing trade fight between Washington and Beijing after the Trump administration announced tariffs on $50 billion worth of Chinese goods coming into the US, as well as planned tariffs on an additional $100 billion worth of Chinese goods.
The U.S. and British governments are telling companies to steer clear of Chinese smartphone maker ZTE.
In addition to the monetary penalties, ZTEagreed to perform audits and to make truthful disclosures to federal investigators for the seven year probationary period.
The ramifications could go even further because seemingly the EAR applies to re-exports as well, so any other company using US IP would in theory be blocked from selling to ZTE.
ZTE halted trading of its shares in Hong Kong and Shenzhen on Tuesday following the announcement of the United States ban. It's also said that ZTE kept on numerous employees that had been involved with violating the law.
Later admissions indicate that the reported actions never took place and that all of the employees, except for one, earned their bonuses.
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.
Separately, the United Kingdom has also warned United Kingdom telecom companies to not use ZTE equipment and services, on security grounds.
The Chinese Commerce Ministry said today it hoped Washington would treat ZTE Corp. fairly after US authorities concluded it paid bonuses to employees involved in a scheme to ship equipment to North Korea and Iran instead of disciplining them as it promised in 2017.
The US government has imposed a seven-year export ban on ZTE for repeated violation of trade laws.
In response, the DoC says it will opt to implement the export ban, meaning ZTE and its subsidiaries are cut off from getting hardware and software from American manufacturers. ZTE may have to either buy from a competitor or get chips from a Taiwanese company whose products generally lag those of its US rival's in performance.
Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company.
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