Earlier this year ZTE found itself on the wrong side of the friend or foe line with regard to the U.S. government. After allegations surfaced that ZTE was channeling technology to Iran contrary to U.S. export-controls, the Commerce Department proposed what would have been some of the toughest trade sanctions ever levied by the U.S. against a company. Shortly after that, a reprieve was issued based on ZTE’s interest in cooperating with the government’s investigation. That reprieve was scheduled to end on June 30th, but a statement issued by the Commerce Department on Monday indicates the government is extending relief through at least the end of August.
The restrictions that were originally proposed by the U.S. government would have prevented U.S. companies from selling any technology, software or equipment to ZTE. This would have a major impact on ZTE’s supply chain. ZTE chairman Zhao Xianming notes that the company wants to maintain “relationships with hundreds of American companies and our continued investment in the U.S.” Thus, there is significant incentive for ZTE to continue to cooperate with the U.S. government.
The original complaint regarding ZTE indicated the company had set up shell companies to funnel technology from the U.S. to Iran. Normally the technology could not be sold to Iran. If shell companies were used for this purpose, it would be to skirt around those trade restrictions. Although ZTE has largely been quiet on the matter, the Chinese government did use the original sanctions as a trigger point to complain about the U.S. trying to impose their trade philosophy on other countries.