The Department of Commerce is set to impose sanctions on Chinese telecommunication manufacturer ZTE on Tuesday, a move widely seen as a response to concerns about Chinese surveillance in the midst of the country’s recent commercial espionage campaign against the United States.
However, as its justification for the sanctions, the agency cites what it calls the company’s “planned and organized … scheme to establish, control, and use a series of [shell] companies to illicitly re-export controlled items to Iran” in contravention of U.S. law.
Specifically, the agency said, shell companies were used to sign contracts with Iranian clients, purchase blacklisted items, and re-export them from China to Iran. Yet in a statement on the matter, the ranking Democrat on the House Intelligence Committee said the Chinese should view it as a reaction to the country’s theft of trade secrets.
“We hope this sends a strong message to ZTE, to China, and to other Chinese telecommunications companies who present serious national security risks not only by evading export controls, but by purposefully compromising supply chain security,” said Rep. Adam Schiff, D-Calif.
The country’s government objected to the move. “China is opposed to the U.S. citing domestic laws to place sanctions on Chinese enterprises,” said Foreign Ministry spokesman Hong Lei.
The 30-year-old ZTE operates in 160 countries, according to the company’s website, and is one of the world’s top ten smartphone manufacturers. The sanctions arguably represent the first related, if only tangentially, to the country’s theft of commercial secrets.
Chinese companies that officials have previously named as culprits in cases commercial espionage include Chinalco, SNPTC, and Baosteel, respectively manufacturers of aluminum, nuclear power, and steel.
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Last year, President Obama signed an executive order allowing the Commerce Department to impose sanctions on Chinese companies that have engaged in the theft of trade secrets. To date, that particular authority has gone unused.
