The U.S. Department of Commerce has officially banned American companies from selling components to electronics company ‘ZTE.’ The 7-year ban is a result of the company attempting to conspire to violate the sanctions placed by the U.S. The company is one of the top smartphone sellers in the United States, and these sanctions will be sure to have devastating effects on the company’s participation in international markets.
Last year, a five-year federal investigation revealed ZTE’s intent to conspire against U.S. sanctions by buying U.S. components and incorporating the materials into their equipment and illegally shipping these products to Iran. The company paid around $890 million in fines and penalties, and there’s a possibility that an additional penalty of $300 million could be imposed as a result of the company’s scandalous behavior.
Per CNBC, ZTE also agreed to “dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told Reuters, [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.”
Douglas Jacobson, an exports control lawyer who represents American suppliers to ZTE, claims the ban is highly unusual in the following statement:
“This will be devastating to the company, given their reliance on U.S. products and software. It’s certainly going to make it very difficult for them to produce and will have a potentially significant short and long-term negative impact on the company… This is going to tank their stock.”
ZTE has sold handset devices to some of the most powerful mobile carriers in the world including AT&T, T-Mobile, and Sprint. These companies will anticipate changes to their own inventory since their direct provider is no longer able to sell them the products. Ultimately, these sanctions could prove to increase tensions between the U.S. and China over trade.