US suspends ZTE trade sanctions

In a move which could be seen as a win for everyone involved, the US has given ZTE a reprieve from the trade sanctions placed on it a fortnight ago.

As punishment for ZTE allegedly breaching international trade embargoes with Iran, the US sought to slap ZTE’s wrists by banning trade with domestic companies. The Chinese kit vendor supposedly sent US-made kit to TCI, Iran’s biggest operator.

The US subsequently stuck a red flag next to ZTE’s name and the Department of Commerce’s Bureau of Industry and Security listed ZTE as a party of concern on the Entity List, meaning an additional application is required from any US-based company wishing to conduct business with the vendor. Given ZTE’s partners in the US include chip vendors Qualcomm and Intel, future business under severe embargoes would be pretty unsustainable.

The latest development in the saga has seen the American DoC give ZTE something of a stay of execution. Documents released by the US government say they have allocated a temporary general license for ZTE to trade in the US until 30^th June 2016, which can be extended if ZTE fully cooperates with resolving the matter.

ZTE, in turn, released a suitably cooperative statement in response. Given how much is at stake, it was left with little choice but to play nice.

“ZTE has committed to, and fully expects to, fulfil all of the commitments in order to be removed permanently from the Entity List,” it said. “This interim relief will enable ZTE to continue serving its major stakeholders as it works with the US authorities to reach a permanent resolution. ZTE is fully committed to complying with the laws and regulations in the jurisdictions in which it operates, and will be continuing to make further contributions to global telecoms industry.”

What could be seen as a climb down from each side could be interpreted as a win for either party. The US has made the point pretty clear that its international trade policy won’t be trifled with, and will continue to run the show while ZTE atones for its alleged sins. The potential Sino-American political ramifications of long-term trade sanctions on China’s second largest exporter of network gear have been avoided for now, which China could see as a mini victory itself while ZTE continues to trade in the US. The hope is that a possible escalation of tit-for-tat sanctions has been averted.