US companies have been banned from selling hardware and software to ZTE, after the Chinese company admitted to violating Iran and North Korea sanctions. The firm – which makes smartphones, telecoms hardware, and more – will no longer be able to purchase components from American manufacturers like Qualcomm and Intel, and it could put its current use of Android into jeopardy.
ZTE had admitted that, despite sanctions against shipping US-made components to the two countries, it had circumvented those embargoes. A five year long federal investigation concluded that the company had been buying US components and using them in its own products, some of which had been distributed in Iran and North Korea. ZTE then went on to hide the practice.
When challenged by the US Department of Commerce, ZTE agreed to plead guilty to the actions. It also accepted a combined civil and criminal penalty and forfeiture of $1.19 billion. “In addition to these monetary penalties,” the US DoC said today, “ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).”
Now, though, the Department of Commerce says it believes ZTE made false statements in 2016 and 2017. Not only did ZTE continue to pay full bonuses to employees that had been involved in the illegal activities, it also failed to issue letters of reprimand.
““ZTE misled the Department of Commerce,” Wilbur L. Ross, Secretary of Commerce, said today. “Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored.”
The implications for ZTE could be huge. The ban, which will last for seven years, will cover “any commodity, software or technology” exported from the United States. That presumably includes any software ZTE might buy licenses for from US firms.
It leaves ZTE’s use of Android in a potential quandary. The software is released under the open source license, which means that ZTE can presumably continue to install it on its smartphones and tablets. However, that doesn’t include Google’s specific apps for Gmail, the Google Play store, Google Maps, and other software. Use of those is governed by the Mobile Application Distribution Agreement, or MAPA, a contract signed between Google and device OEMs.
Without that agreement – which, it would appear at first glance, Google would no longer be able to extend to ZTE under the terms of these sanctions – ZTE’s phones could not be considered Android certified. Currently, ZTE is listed as providing certified Android devices, which Google describes as being “tested for security and performance and preloaded with Google apps.”
MORE US Department of Commerce order [pdf link]