ZTE: Fines likely in settlement related to allegedly violating export restrictions on Iran

ZTE sign
The U.S. government imposed export restrictions on ZTE last year.

Chinese vendor ZTE said that it may reach a settlement with the U.S. government over allegations the company violated American export controls on Iran. However, the company said that it expects to pay a significant fine related to the settlement.

“The Company is negotiating with the U.S. Commerce Department, the U.S. Department of Justice and the U.S. Department of Treasury on the settlement issues, the outcome of which is expected to result in penalties (including but not limited to a fine and other relevant liabilities under U.S. laws) imposed on the Company by relevant U.S. government departments,” ZTE said in a statement on its website (PDF). “The outcome of the settlement issues still remains uncertain but will likely have a material impact on the financial conditions and operating results of the Company. The Company will make announcements of material development of the above matters as soon as practicable.”

The Commerce Department last year said it had uncovered plans by ZTE to use multiple shell companies to re-export controlled items to Iran, which would violate U.S. control laws. As a result, the U.S. government imposed export restrictions on the company, preventing ZTE from conducting business in the United States and working with U.S. suppliers like Broadcom and Qualcomm. But ZTE has since received a number of reprieves from those restrictions as investigations into the company continued.

RELATED: ZTE scores another reprieve from U.S. export sanctions

Now, though, it appears ZTE is nearing an agreement with the U.S. government on the topic, a settlement that appears to contain the possibility that the Chinese company will pay a hefty fine. That’s noteworthy considering the incoming Trump administration has been a harsh critic of Iran and China.

ZTE is a major smartphone vendor in the United States and a major player in the international wireless industry in both network equipment and smartphones.

But this isn’t the first time the company has faced regulatory challenges in the U.S. market. The Commerce Department investigated ZTE for alleged export-control violations in 2012 following reports it had inked deals to ship hardware and software from American tech businesses to Telecommunication Co of Iran (TCI), that country's largest telecom operator. And also in 2012 a U.S. government report (PDF) called out China-based network vendors Huawei and ZTE as security threats that could be used as backdoors for Chinese espionage.