UK, US Governments Warn Against Buying ZTE Hardware

A Chinese national flag and two flags bearing the name of ZTE fly outside the ZTE R&D building in Shenzhen China

A Chinese national flag and two flags bearing the name of ZTE fly outside the ZTE R&D building in Shenzhen China. Image Reuters

The NCSC's letter cited a settlement agreed between ZTE and U.S. officials back in March, when the company was fined $1.2bn after pleading guilty to criminal charges of violating USA sanctions on North Korea and Iran. The company may still have a chance at redeeming itself in the United Kingdom, but as far as the US goes, that's a much different story.

In March 2017, ZTE settled after the US government discovered that it was shipping USA technology to sanctioned countries such as North Korea and Iran. 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. While it is not related to links between the ZTE and the Chinese government, it is actually because of shipping the U.S. hardware to the USA sanctioned countries.

The Chinese company, which sells smartphones in the United States, paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed. ZTE did fire the four execs, but it failed to institute any punishment for those 35 employees. The biggest stinging point of this ban lies in ZTE's loss of access to Qualcomm components, including the Snapdragon line of SoCs.

Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company. "It's certainly going to make it very hard for them to produce and will have a potentially significant short and long-term negative impact on the company".

On top of the false statements regarding USA components, Ross also claims ZTE did not live up to promises when it came to firing or disciplining employees who were directly involved with the initial complaint. As part of the initial agreement, ZTE was allowed to continue to work with USA companies, assuming it adhered to the rules laid out in the agreement. USA versions of ZTE phones were found to have a backdoor in 2012.

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The company was supposed to take disciplinary action against multiple individuals at ZTE.

The new restrictions stem from a January 16 report by a US monitor appointed by a federal judge in Texas who accepted the guilty plea in March 2017.

The Commerce Department said in a statement it was revoking ZTE's export license.

Allowing Huawei, ZTE, and other related entities access to USA government communications would be inviting Chinese surveillance into all aspects of our lives.

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