On April 15, 2018, the Bureau of Industry and Security (BIS) issued an Order relating to Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (collectively, ZTE) that suspends the export privileges of ZTE for a period of seven years, until March 13, 2025. Pursuant to the Order, ZTE may not, 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 Export Administration Regulations (EAR), or in any other activity subject to the EAR. American companies, in effect, are now banned from selling components to the telecom equipment maker for the next seven years.
The origin of this suspension dates back to March 23, 2017, when ZTE agreed to a settlement agreement for a record-high combined civil and criminal penalty of $1.19 billion for violating U.S. sanctions by illegally shipping U.S. goods to Iran. In the settlement agreement, BIS imposed against ZTE a $661 million civil penalty, with $300 million of that amount suspended for a probationary period of seven years, which was then to be waived. ZTE subsequently violated the terms of this probationary period by failing to implement the proper employee disciplinary actions. As a result, ZTE will pay the remaining $300 million of the original penalty in addition to its seven-year suspension.