ZTE Corporation (ZTE), a major Chinese telecommunications equipment manufacturer, has released a statement announcing that “the major operating activities of the [c]ompany have ceased.” ZTE went on to add that while it “maintains sufficient cash and strictly adheres to its commercial obligations subject to compliance with laws and regulations,” it is “actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal of the Denial Order by the U.S. government and forge a positive outcome in the development of the matters.” ZTE’s woes began on April 16, 2018 when the U.S. Secretary of Commerce Wilbur L. Ross announced that the agency’s Bureau of Industry and Security (BIS) imposed a “denial of export privileges” against ZTE and its affiliates. According to the BIS release, in March 2017, “ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. government.” In addition to the monetary penalties, BIS imposed a suspended seven year denial of export privileges, which could be activated if ZTE failed to adhere to the export restrictions. After a thorough review, BIS determined that ZTE made false statements to BIS in 2016 and 2017 during the probationary period. Among the violations, ZTE paid bonuses to employees who engaged in illegal conduct and failed to issue letters of reprimand. While ZTE’s announcement did not elaborate exactly what the suspension of major operations entails, it added that it would halt the trading of publicly-traded “H shares” and make future “announcements of material developments…as soon as practicable.”
