U.S. Commerce Department to Impose Export Restrictions on China’s ZTE

According to documents seen by Reuters, the U.S. Commerce Department is going to place export restrictions on Chinese telecom equipment manufacturer ZTE Corp (000063.SZ) for suspected violations of U.S. export controls on Iran.

U.S. Commerce Department to Impose Export Restrictions on China’s ZTE

The restraints will make it hard for the company to get U.S. products by requiring ZTE’s sellers to apply for an export license before shipment of any American-made equipment to ZTE. According to a Commerce Department notice that will be issued next week in the U.S. Federal Register, the license applications mostly will be repudiated.

Reuters has learned that the restrictions will take effect Tuesday, and will apply to any company globally that wants to ship American-made products to ZTE Corp in China.

“This is a significant new burden on trade with ZTE.”

A senior official at the Commerce Department informed Reuters.

The official refused to comment on whether the U.S. government might take any action against ZTE. It revealed in a statement on Sunday that it was sentient of media reports on U.S. export restrictions.

“ZTE is highly concerned about recent media reports relating to a U.S. Department of Commerce investigation.”

The company stated.

“ZTE has been working with associated U.S. government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns.”

Trade in shares in ZTE, which also sells consumer electronic gadgets such as smartphones in the United States, was deferred on Monday in Hong Kong and Shenzhen.

“We believe the restrictions, if implemented, will cause significant supply problems to ZTE.”

Jefferies analyst Cynthia Meng wrote in a note, further adding

“ZTE has major trading relationships with several U.S. companies including Qualcomm (QCOM.O), Microsoft (MSFT.O) and IBM (IBM.N).”

Meng also said that telecoms equipment and terminal businesses collectively account for 80% of ZTE’s total revenue of 2015.

Washington has long debarred the sale of United States-made technology merchandises to Iran. The Commerce Department’s inquiry concentrated on whether ZTE had attained American products through front companies and then shipped them to Iran in desecration of U.S. consents.

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