United States: Export Restrictions Imposed On Chinese Telecommunications Giant ZTE And Temporary Relief Subsequently Granted

Effective March 8, 2016, BIS issued a final rule adding Zhongxing Telecommunications Equipment Corporation (ZTE) of Shenzhen, China, and the following related companies to its Entity List: Beijing 8Star International Co., located in Beijing, China; ZTE Kangxun Telecommunications Ltd. ("ZTE Kangxun"), located in Shenzhen, China; and ZTE Parsian, located in Tehran, Iran. The Entity List designations stem from BIS allegations that ZTE set up shell companies to circumvent U.S. export controls and sanctions on Iran. BIS cited ZTE documents that explicitly advocate the use of shell companies to hide ZTE's role in transactions with Iran.

The designation prohibits both U.S. and non-U.S. persons from exporting, re-exporting or transferring any items subject to the EAR to entities on the Entity List without obtaining a license from BIS. Generally, a presumption of denial is imposed on such license requests, effectively restricting the access of those on the Entity List to U.S.-origin items and other items subject to the EAR.

On March 24, 2016, acknowledging ZTE and ZTE Kangxun's request to be removed from the Entity List and their related binding commitments made to BIS, BIS published a temporary general license in the Federal Register that has the effect of reversing the Entity List designations as they apply to ZTE and ZTE Kangxun (but not the other ZTE entities). The temporary general license restores the licensing policy and requirements pertaining to ZTE and ZTE Kangxun as they applied prior to the designations to the Entity List. It does not affect other obligations that may apply under the EAR with respect to ZTE and ZTE Kangxun. The temporary general license is valid until June 30, 2016, and is renewable as long as the U.S. government determines that ZTE and ZTE Kangxun are timely fulfilling their binding commitments.

For additional information, see the BIS press release, Akin Gump's International Trade Alerts here and here, March 8 and March 24 Federal Register Notices, and media reporting on the temporary license.

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