The Bureau of Industry and Security (BIS) on Monday issued a temporary authorization, to expire Aug. 1, for all U.S. persons to engage in several types of transactions with Chinese telecommunications company ZTE, which has been subject to an active export denial order since April 15.
The authorization provides for any transaction necessary to maintain and support any networks and equipment, including software updates or patches, subject to contracts and agreements executed between ZTE and third parties before April 15; and transactions necessary to provide service and support, including software updates or patches, to ZTE phones.
The authorization also allows disclosure to ZTE of information regarding security vulnerabilities in items owned, possessed or controlled by ZTE when related to providing ongoing security research critical to maintaining communications networks and equipment and allows parties to make and receive payments to or from the company for “transactions and activities lawful pursuant to this authorization.”
The authorization allows for these actions to be conducted by all U.S. and foreign persons, except for those located in Cuba, Iran, North Korea, Sudan and Syria, which compose the U.S. government’s “Country Group E” sanctions designation.
ZTE has installed new personnel in several senior management positions, the South China Morning Post reported Thursday, after an agreement with the U.S. Commerce Department apparently reached about a month ago required ZTE to do so, along with paying the U.S. government $1.4 billion in direct and escrow payment and hiring a BIS-selected team of special compliance coordinators.
ZTE promoted the president of its telecom cloud and core network product line, Xu Ziyang, to the position of CEO; promoted a vice president in its finance department, Li Ying, to be CFO; and will staff a newly elected executive director of a new board of directors, Gu Junying, to be the head of its human resources department.
BIS clarified that the authorization doesn’t relieve people of other obligations under the Export Administration Regulations (EAR), including but not limited to licensing requirements to China or elsewhere.
Further, except for those transactions explicitly authorized via BIS’ Monday notice, transactions subject to the export denial order remain prohibited without additional written prior authorization by the agency.
The April 15 action, which lifted a suspension on an export denial order regarding ZTE, stemmed from illegal shipments by ZTE to Iran and North Korea, in violation of U.S. sanctions, and from a discovery by U.S. officials’ discovery that ZTE employees made false statements to BIS in 2016 and 2017.
ZTE sources approximately 60 percent of the materials and components for its smartphones from U.S. suppliers.