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ZTE fine highlights 'extremely tough' approach US takes to sanctions enforcement, says expert


Chinese technology company ZTE has agreed to pay fines totalling $1.19 billion as part of a settlement reached with US authorities over its violation of sanctions imposed on trade with Iran and North Korea.

The case shows that US sanctions enforcement "remains extremely tough" and "is a timely reminder that US sanctions and export controls, and for that matter EU sanctions and export controls, often have extra-territorial application", said sanctions specialist Tom Stocker of Pinsent Masons, the law firm behind Out-Law.com.

According to the US Department of Commerce (DoC), ZTE "conspired to evade" a US embargo on trade with Iran between January 2010 and April 2016 to "supply, build, operate, and/or service large-scale telecommunications networks in Iran". The company also shipped a number of "controlled items" such as routers, microprocessors, and servers to North Korea in breach of export rules, and tried to conceal the activity from US authorities, the DoC said.

The DoC said that ZTE knowingly misled US authorities looking into its trade activities, and had deleted documents and other information, including emails, in an effort to "thwart the investigation".

Stocker said: "ZTE is not a US company but it was subject to US sanctions enforcement because it supplied US origin goods to Iran. It was able to do so by deceiving US suppliers that the goods were destined for China or other countries."

"While ZTE engaged in deliberate circumvention of US sanctions, it is not uncommon for us to see companies seek to structure transactions to avoid the application of US and EU sanctions and export controls, commonly by seeking to enter into contracts through overseas subsidiaries. Often such structures are ineffective or themselves caught by anti-circumvention provisions," he said.

"Much trade with Iran by non-US companies is now perfectly lawful but businesses need to be careful because sanctions and export controls against Iran remain in place. Any business that is considering trade with Iran should take EU and US legal advice before proceeding," Stocker said.

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