After the US Department of Commerce this week issued a 7-year ban on ZTE trading with US companies after issues were raised regarding breaking trade embargoes, ZTE has today released a statement advising they will fight the ban using legal methods if necessary.
The statement says that the Bureau of Industry and Security (BIS) ban imposed on ZTE is unfair, and will ‘not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of U.S. companies’.
ZTE has pointed to the number of processes and procedures they’ve put in place to ensure that they comply with the relevant trade agreements with various countries around the world. They believe that the BIS did not take into account their continued efforts to comply with the embargo restrictions, nor that ZTE themselves identified and reported the breach, as well as taken measures against the employees responsible and attempted to correct the issues immediately.
The ban imposed by the BIS will affect ZTE’s ability to import both hardware and software from the US, which likely includes software licensing which would mean their continued use of Android and Google Play Services and Apps will likely be affected. The hardware ban means that ZTE would be unable to access components from companies including Qualcomm, Intel, AMD, Nvidia and other hardware companies though a move to the likes of Mediatek could prove to be a possibility.
The full statement from ZTE reads:
Statement of ZTE Corporation on Activation of the “Denial Order” by U.S. Department of Commerce
Since April 2016, ZTE Corporation (hereinafter referred to as “ZTE”) has continuously reflected on lessons from its past experience in Export Control Compliance and has attached great importance to Export Control Compliance. Within ZTE, compliance is regarded as the foundation and bottom-line of the Company’s operation.
ZTE has established a Compliance Committee led directly by its CEO; built a global team of experienced export control compliance experts; engaged several world-class counsels and consultants to provide professional guidance in order to establish and optimize ZTE’s export control compliance structure, system and procedure; introduced and implemented the SAP Global Trade System (GTS); organized compliance training covering over 65,000 employees; cooperated comprehensively with the independent Monitor designated by U.S. Government to ensure the Monitor’s real-time and transparent monitoring over ZTE’s implementation of the relevant Agreements with U.S. Government and applicable export control compliance requirements, and provided over 132,000 pages of documents. In 2017 alone, ZTE invested over USD 50 million in its export control compliance program and is planning to invest more resources in 2018.
However, the Bureau of Industry and Security (hereinafter referred to as “BIS”) activated the Suspended Denial Order on 16 April 2018, on the ground that ZTE did not timely reduce bonus of and issue letters of reprimand to certain employees involved in past violation of export control and made false statements in correspondence with the U.S. Government.
ZTE has been working diligently on Export Control Compliance program and has invested tremendous resources in export compliance and has made significant progress since 2016. It is unacceptable that BIS insists on unfairly imposing the most severe penalty on ZTE even before the completion of investigation of facts, ignoring the continuous diligent work of ZTE and the progress we have made on export compliance and disregarding the fact that (1) ZTE self-identified the issues in the correspondence and self-reported by ZTE immediately; (2) the Company has taken measures against the employees who might have been responsible for this incident; (3) corrective measures has been taken immediately; and (4) a prestigious U.S. law firm has been engaged to conduct independent investigation.
The Denial Order will not only severely impact the survival and development of ZTE, but will also cause damages to all partners of ZTE including a large number of U.S. companies.
In any case, ZTE will not give up its efforts to resolve the issue through communication, and we are also determined, if necessary, to take judicial measures to protect the legal rights and interests of our Company, our employees and our shareholders, and to fulfill obligations and take responsibilities to our global customers, end-users, partners and suppliers.
As a global company originating in China, ZTE will unite all of its employees as one with full confidence to work together taking best efforts to facilitate a final resolution.