Supply Chain

ZTE Fined $900M for Iran Sanctions Busting

The Chinese telecom equipment company allegedly shipped about $32 million of sensitive U.S.-made technology to Iran between 2010 and 2016.
Matthew HellerMarch 8, 2017
ZTE Fined $900M for Iran Sanctions Busting

Chinese telecom equipment maker ZTE Corp. has agreed to pay nearly $900 million to settle U.S. allegations that it evaded sanctions against Iran by shipping about $32 million of sensitive U.S.-made technology to the country.

ZTE purchases about $2.6 billion worth of components a year from U.S. firms including Qualcomm, Microsoft and Intel. A five-year investigation found that between 2010 and 2016, the company incorporated U.S-made parts into equipment, which it then shipped — either directly or through a third party — to customers in Iran without obtaining the proper export licenses from the U.S. government.

The Department of Justice also said ZTE lied to federal investigators when it insisted, through outside and in-house counsel, that it had stopped sending U.S.-origin items to Iran.

To settle the investigation, ZTE will pay $892.3 million in fines for violating the International Emergency Economic Powers Act, obstructing justice and making a material false statement.

“ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s — they lied to federal investigators and even deceived their own counsel and internal investigators about their illegal acts,” Attorney General Sessions Jeff Sessions.

According to the DoJ, the wrongdoing began in 2010 after ZTE signed contracts to supply equipment for two cellular and landline network infrastructure projects in Iran.

“In its shipping containers, it packaged the U.S. items with its own self-manufactured items to hide the U.S.-origin goods,” the department alleged, adding that ZTE did not include the U.S. items on the customs declaration forms.

After a hiatus, the shipments allegedly restarted in July 2014 and continued through 2016.

Tim O’Toole, a lawyer with Miller & Chevalier who specializes in sanction cases, said ZTE’s attempts to obstruct the investigation may have been the main reason for a penalty that was significantly higher than in similar cases.

“What seems really important to U.S. regulators is whether a company or individual after the investigation starts is seen to continue to evade the sanctions and also obstruct the investigation,” he told Reuters.

4 Powerful Communication Strategies for Your Next Board Meeting