US Department of Commerce Prohibits American Companies from Selling Components to ZTE

The ongoing tussle between US and China is already impacting businesses and now in a latest turn of events, the U.S. Department of Commerce has banned American companies from selling components to Chinese telecom equipment maker ZTE Corp for seven years. The ban was imposed after ZTE failed to comply with an agreement with the U.S. government after it pleaded guilty last year in federal court in Texas to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran.

The U.S. action, first reported by Reuters, could be devastating to ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE’s equipment, which includes smartphones and gear to build telecommunications networks.

ZTE Corp paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed. They also promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them. But the Chinese company admitted in March that while it had fired the four senior employees, it had not disciplined or reduced bonuses to the 35 others.