Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government
Secretary of Commerce Wilbur L. Ross, Jr. today announced that the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, of Shenzhen, China (“ZTE Corporation”) and ZTE Kangxun Telecommunications Ltd. of Hi-New Shenzhen, China (“ZTE Kangxun”) (collectively, “ZTE”).
In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. Government. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).
The Department of Commerce has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken. ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred.
“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation.” said Secretary of Commerce Ross.
These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.
“ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored,” Secretary Ross said.
Denial Orders are issued by the Assistant Secretary for Export Enforcement of the Bureau of Industry and Security, denying the export privileges of a company or individual. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the EAR with a denied person.
NCSC advice to telecommunications sector about ZTE
The NCSC is issuing advice to the UK telecommunications sector regarding the potential use of ZTE equipment and services.
Dr. Ian Levy (Technical Director of the National Cyber Security Centre) is writing to telecommunications organisations regarding the potential use of ZTE equipment and services in the UK telecommunications infrastructure environment. ZTE is a Chinese state-owned enterprise. His letter sets out the NCSC’s considered technical advice in regard to the potential use of ZTE equipment and services in the UK telecommunications infrastructure.
Dr Ian Levy, Technical Director of the National Cyber Security Centre said:
“It is entirely appropriate and part of NCSC’s duty to highlight potential risks to the UK’s national security and provide advice based on our technical expertise.
“NCSC assess that the national security risks arising from the use of ZTE equipment or services within the context of the existing UK telecommunications infrastructure cannot be mitigated.”
The National Cyber Security Centre a part of GCHQ, the Government Communications Headquarters is an intelligence and security organisation responsible for providing signals intelligence and information assurance to the government and armed forces of the United Kingdom.