U.S. Commerce Department to place restrictions on ZTE Corp

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The ZTE company logo is seen as a guest delivers a speech during the company's 15th anniversary celebration in Beijing April 18, 2013.   REUTERS/Barry Huang
The ZTE company logo is seen as a guest delivers a speech during the company’s 15th anniversary celebration in Beijing April 18, 2013.

Reuters/Barry Huang

The U.S. Commerce Department is set to place restrictions on exports of U.S. products by Chinese telecoms equipment maker ZTE Corp (000063.SZ) for allegedly violating U.S. export controls related to Iran, according to documents seen by Reuters.

The restrictions will take effect on Tuesday and will require ZTE’s U.S. suppliers to apply for an export license before shipping anything to ZTE in China.

The license applications generally will be denied, according to the restrictions imposed on ZTE and three affiliates.

The export curbs apply to any company worldwide that wants to ship U.S. products to ZTE Corp in China.

“This is a significant new burden on trade with ZTE,” a senior official at the Commerce Department told Reuters.

A spokesman for ZTE, based in Shenzhen, China, could not be reached for immediate comment. The company can appeal the action.

The Commerce Department investigated ZTE following reports by Reuters in 2012 that ZTE had signed contracts to ship millions of dollars worth of hardware and software from some of America’s best-known tech firms to Iran’s largest telecom carrier, Telecommunication Co of Iran (TCI), and a unit of the consortium that controls it.

The U.S. product makers – which included Microsoft Corp , IBM (IBM.N), Hewlett-Packard Co., Oracle Corp (ORCL.N) and Dell Inc [DI.UL], among others, have all said they were not aware of the Iranian contracts.

Washington has long banned the sale of U.S.-made tech products to Iran.

A day after the first Reuters article was published, a ZTE spokesman said the company would “curtail” its business in Iran. The company later issued a statement saying: “ZTE no longer seeks new customers in Iran and limits business activities with existing customers.”

What effect the new export restrictions will have on ZTE’s business is not clear.

It has stated on one of its websites that some of the largest U.S. tech companies, including Microsoft, Intel, IBM and Honeywell, “are all key strategic partners of ZTE.”

A spokeswoman for Microsoft said the company had a licensing agreement with ZTE but could not confirm if the Chinese company purchases other products. The other U.S. companies did not respond to requests for immediate comment.

ZTE Corp is one of the world’s largest telecom equipment makers with operations in 160 countries, according to its website. Founded in 1985, its shares trade on both the Hong Kong and Shenzhen Stock Exchanges.

Besides ZTE, the export curbs will apply to two Chinese affiliates, ZTE Kangxun Telecommunications Ltd and Beijing 8-Star, and an Iranian company, ZTE Parsian.

(Editing by Alex Smith and Jason Neely)