ZTE is once again in the crosshairs of US authorities over alleged breaches of export controls of telecoms equipment to Iran.

In a publicly available 'charging letter' issued by the US Commerce Department, ZTE is effectively accused of violating export administration regulations (EAR) by colluding with Far East Cable, described by the department as China's largest wire and cable manufacturer, to hide business dealings in Iran, although it is Far East Cable that is in the direct firing line of the commerce department.

The charging letter alleges that Far East Cable signed contracts with ZTE and Iranian telecommunications companies to deliver US-origin equipment to Iran "as part of an effort to conceal and obfuscate ZTE's Iranian business from US investigators."

Figure 1: According to the US Commerce Department, Far East Cable entered into a "framework agreement" (December 2013) to purchase network equipment from ZTE for around $164 million.
(Source: Jordi Boixareu/Alamy Live News)

The US Commerce Department's Bureau of Industry and Security (BIS) is charging Far East Cable with 18 violations of EAR, which, claims BIS, took place between September 2014 and January 2016.

"Far East Cable acted as a cut-out for ZTE, facilitating ZTE shipments to Iran at the very time ZTE knew it was under investigation for the exact same conduct," said John Sonderman, director at BIS' office for export enforcement.

"Far East Cable engaged in serious conduct as part of the attempt to conceal the activity from US investigators. These charges should send a strong message to any company contemplating facilitating violations on behalf of another."

ZTE previously paid a combined penalty of $1.19 billion in criminal and administrative fines after pleading guilty in March 2017 to breaking EAR by shipping US-origin equipment – American companies provide various components for the Chinese supplier's equipment – to Iran

More alleged wrongdoing in Iran, not covered by the hefty fine, is no doubt an embarrassment to ZTE and, potentially, a massive financial hit for Far East Cable if the US Commerce Department proves its case.

Wheeling and dealing?

According to the US Commerce Department, Far East Cable entered into a "framework agreement" (December 2013) to purchase network equipment from ZTE for around $164 million. The company then flogged ZTE's kit to Telecommunications Company of Iran (TCI) and Tamin/Rightel, another Iranian company, in 2014.

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The contracts that Far East Cable signed with TCI and Tamin/Rightel, claimed Sonderman's charging letter, "did not reference ZTE and thus appeared to establish contractual relationships with no apparent connection to ZTE. However, TCI and Tamin/Rightel were, in fact, longtime customers of ZTE."

Far East Cable has 30 days to respond to the charging letter, which is dated July 29.

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— Ken Wieland, contributing editor, special to Light Reading