China hits back at US after firm penalized over Iran business

ZTE ‘used shell companies to illegally reexport controled items to sanctioned countries,’ US claims

By AFP 8 March 2016, 11:28 am

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This file photo taken on February 23, 2016 shows visitors testing smart phones at the ZTE's stand during the Mobile World Congress in Barcelona. The United States said March 7, 2016 it is placing trade restrictions on Chinese telecommunications equipment giant ZTE due to violations of US sanctions on Iran.The Commerce Department said in an order to be officially published on Tuesday that ZTE Corp and related companies set up a scheme to circumvent US sanctions and "illicitly export" controlled items to Iran, violating US laws. / AFP / LLUIS GENE

China on Tuesday criticized a move by Washington to slap restrictions on one of the country’s biggest telecommunications equipment companies, ZTE, for violating US trade sanctions on Iran.

The US Commerce Department said ZTE Corp. and related companies set up a scheme to circumvent sanctions and “illicitly export” controlled items to Iran, violating United States laws.

ZTE, China’s second-biggest telecom equipment maker, must now apply for permission for exports from the US to the company, it said. Such limits could hamper ZTE’s ability to purchase technology hardware and software in the US.

“China expresses strong dissatisfaction and firm opposition to this,” China’s ministry of commerce said in a statement, quoting an unnamed official.

“The US move will severely affect the Chinese company’s normal business activities,” it said, but added the government hoped to negotiate over the issue.

Founded in 1985, ZTE offers both telecom equipment and services, with customers in more than 160 countries, according to the company.

On the sidelines of China’s annual meeting of lawmakers, foreign minister Wang Yi told reporters: “This is not the correct way to handle economic and trade disputes. It will hurt people without benefitting oneself.”

The case dates back to 2012 when the US Department of Commerce first began investigating the transfers of US technology to Iran, according to media reports.

The US government agency said on Monday that ZTE used a series of shell companies to illicitly reexport controlled items to sanctioned countries.

In a separate statement Tuesday, ZTE said it hopes to resolve the matter.

“ZTE Corporation is committed to abiding by international industry conventions and the laws and regulations of the countries it is present in,” it said.

The statement added ZTE “is committed to seeking a plan to resolve the matter as soon as possible.”

Washington in January eased several restrictions on doing business with Iran, following an international agreement over the country’s nuclear programme.

But sanctions tied to accusations that Tehran supports terrorism remain in effect, still largely blocking US companies from business with Iran.

Shares of ZTE were suspended for a second day on the Hong Kong and Shenzhen stock exchanges, where they trade.