EuroWire May 2016

Transatlantic cable

As reported by the legal issues site JDSupra , BIS investigators claim to have obtained internal ZTE documents that provide an overview of US export-control rules and describe the risks for ZTE in doing business in sanctioned countries – as well as recommendations for circumventing them. BIS alleges that ZTE set up shell companies in order to conceal the company’s role in transactions with Iran. According to JDSupra , BIS cites one document noting that “the biggest advantage [of this model] is that it is more e ective, [making it] harder for the US Government to trace it or investigate the real ow of the controlled commodities.” BIS “took the unusual step” of making public these materials, marked Top Secret and Highly Con dential by ZTE. (“US Export Controls Restrictions Imposed on Chinese Telecommunications Giant ZTE,” 11 th March) ZTE Corp is the world’s fth-largest telecom equipment and systems company, behind only Ericsson, Huawei, Alcatel-Lucent and Nokia Siemens. In laying out the rami cations of the BIS designation, given ZTE’s market position, JDSupra said it expects wide-ranging repercussions on customers and companies throughout the global telecom supply chain. According to the Wall Street Journal , ZTE sold nearly 50 million smartphones worldwide in 2015. Bloomberg reported that ZTE depends on American suppliers for 43 per cent of the inputs for the handsets and networking equipment it makes in China, procuring American goods worth more than $450 million per quarter. Following the announcement of the BIS action against ZTE, China’s Ministry of Commerce issued a public statement expressing its “strong dissatisfaction and objection” to the USA export restrictions.

Telecommunications

The US embargo still in place against Iran disrupts the global supply chain of a major Chinese telecom equipment company “ZTE, China’s largest listed telecommunications equipment manufacturer, could face severe component supply problems from this month, based on a reported plan by the US government to slap export restrictions on the company for alleged violations of longstanding American trade sanctions on Iran.” Writing in the South China Morning Post for 7 th March, Bien Perez anticipated by a scant day the US action against Zhongxing Telecommunications Equipment Corp (Shenzhen, China). E ective 8 th March, the Bureau of Industry and Security (BIS) of the Department of Commerce added the company and two of its a liates – one in China, one Iran-based – to the BIS Entity List. The USA imposes export restrictions and licence requirements on those on its list, e ectively restricting their access to items of US-origin and some others. The curbs apply to any company worldwide that wants to ship American-made products to ZTE in China. (“ZTE Faces US Export Restrictions Over Iran Surveillance System Deal,” 7 th March) The action against ZTE was taken under a US embargo on trade with Iran imposed in response to the seizure of the American embassy in Tehran in 1979. Its export controls and sanctions are separate from the international sanctions imposed on Iran over its nuclear programme in 2006 and lifted in January 2016.

27

www.read-eurowire.com

May 2016