China’s ZTE Corporation Will Pay Largest Amount of Civil Penalties and Criminal Fines Imposed to Date
ZTE Corporation, the largest telecommunications company in China, pled guilty on March 7th to conspiracy charges in U.S. District Court involving illegal exports of U.S.-origin goods to Iran, and agreed to pay $890 million to the U.S. Government, which represents the largest criminal fine and civil penalties that have ever been assessed against a company for violations of U.S. export controls and economic sanctions. In joint settlement agreements with the Commerce Department’s Bureau of Industry and Security (BIS), the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Department of Justice, ZTE Corporation agreed to pay the following:
$661 million in civil penalties (with $300 million suspended during a 7-year probationary period) to the BIS for Export Administration Regulations (EAR) violations involving Iran and North Korea, as well as engage a third-party consultant to perform six annual export audits, agree to end-use verifications, and provide U.S. export compliance training to employees.
$100 million in civil penalties to OFAC for violations of the Iranian Transactions and Sanctions Regulations);
$286 million criminal fine, a criminal forfeiture in the amount of $143 million, and $1,200 special assessment to the DOJ for conspiracy to violate the International Emergency Economic Powers Act (IEEPA)—ZTE was also required to retain an independent corporate compliance monitor for a period of three years to report on the companies’ export compliance program.
As we have reported in previous articles, ZTE Corporation, along with three of its affiliated companies, shipped U.S.-origin products through various shell companies to Iran, North Korea, Cuba, Sudan and Syria in violation of U.S. law, and disseminated a written internal procedure describing the companies’ methodology for evading U.S. export controls. Specifically, between 2010 and 2016, ZTE shipped approximately products valued at $32 million to Iran, in connection with the installation of cellular and landline network infrastructure projects in that country, without obtaining the required export licenses from the U.S. government.
This case appears to illustrate the U.S. Government’s commitment to rigorous export investigation and enforcement, maintaining Iran as a top country of concern for U.S. national security, and the continuation of joint agency investigations and settlement proceedings in export enforcement cases.