The US government imposed a huge fine on Chinese telecom equipment maker, saying that ZTE had illegally traded with North Korea and Iran. Analysis says that America’s hard-line measures were aimed at North Korea and China a day after the start of the deployment of the Terminal High Altitude Area Defense (THAAD) system in South Korea.
The US Department of Justice and Depart of Commerce said on March 7 (local time) that ZTE imposed a fine of US$1.192 billion (about 1.372 trillion won) for the Chinese company’s violation of sanctions against North Korea and Iran. This is the largest amount the US government has imposed on foreign companies for violations of the US’s sanctions against the two countries. Of the fine, US$661 million was a punitive penalty, US$300 million of which was suspended for seven years.
ZTE is the second largest telecom equipment company in China after Huawei, and the fourth largest telecommunications equipment maker in the world, following Huawei, Nokia and Ericsson. ZTE was founded in 1985 by a state-run enterprise of the China Aerospace Organization and is known to have received considerable political support from the Chinese government.
ZTE bought large volumes of hardware and software products from American companies such as Qualcomm and Micron Technology, and exported them to North Korea and Iran, the US government said. Specifically, from January 2010 to April last year, the Chinese company exported US mobile phone network equipment worth US$32 million to Iranian companies, including those run by the Iranian government. It was also revealed that ZTE exported mobile phones to North Korea on 283 separate occasions. The specific amount of mobile phone exports to North Korea was not disclosed.
ZTE's illegal exports include routers, microprocessors, and servers. Though ZTE alleged that it did not export such products to North Korea and Iran by making omnidirectional attempts to conceal its illegal activities, the Chinese company finally came clean and agreed to pay fines, said the US government said.
"Imposing the fine corresponds to send the world a warning that the game is over," US Commerce Secretary Wilbur Ross said. "Countries that ignore economic sanctions and export control laws will not be able to avoid punishment and suffer from the most severe consequences. Under the leadership of US President Trump, we will aggressively enforce strong trade policies for two goals -- US security and the protection of American workers."
The analysis is gaining ground that the US government's punishment against ZTE is the first sign of the US’s mounting pressure on North Korea that attempted provocations with missile launches as well as China that has been taking economic retaliations over the deployment of the THAAD System in South Korea. Diplomatic sources say the fine indicates the Trump administration’s strong warning that any firm will be directly punished regardless of its nationality when it illegally trades with nations that possess weapons of mass destruction and threaten the security of the US, including North Korea.
Some analysts say that the measure also implies that the US will use a "secondary boycott" card against Chinese businesses if China continues to stay lukewarm about sanctions against North Korea as it is now.
It is likely that the US will castigate and punish more Chinese companies following ZTE. Currently, the US government is probing Chinese smartphone and communication equipment maker Huawei on similar charges. The US Department of Commerce demanded that Huawei submit all of its records of exporting or re-exporting technological products to North Korea, Iran, Syria, Sudan, and other countries subject to US sanctions last year. The United States is expected to step up sanctions against North Korea in the future.