The Bureau of Industry and Security has issued a final rule removing two Chinese companies from the list of entities restricted from receiving U.S. exports of goods controlled under the Export Administration Regulations. This rule also adds one Chinese entity to the Entity List. These changes are effective as of March 29.
BIS placed Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd. (and two other entities) on the Entity List on March 8, 2016, following its determination that they were involved in a scheme to establish, control, and use a series of shell companies to illicitly reexport controlled items to Iran. BIS subsequently issued a temporary general license that suspended these restrictions and restored the license requirements, license review policies, and license exceptions under the EAR that applied prior to March 8 to exports, reexports, and transfers (in-country) to these two entities.
BIS recently reached an agreement with ZTE Corporation and ZTE Kangxun that resulted in a substantial monetary penalty, intrusive independent monitoring, and additional suspended penalties that will be imposed if ZTE fails to meet its obligations or further violates U.S. export controls. As a result, BIS has concluded that these companies have performed their undertakings to the U.S. government in a timely manner and otherwise cooperated with the U.S. government in resolving this matter and is therefore removing them from the Entity List. This change eliminates the existing license requirements in Supplement No. 4 to part 744 for exports, reexports, and transfers (in-country) to these entities.
However, BIS is adding to the Entity List a former CEO of ZTE Corporation who signed and approved the documents that described how ZTE planned and organized its illegal export scheme. For this person there is a license requirement for exports, reexports, or transfers (in-country) of all items subject to the EAR and a license review policy of presumption of denial. The license requirement applies to any transaction in which items are to be exported, reexported, or transferred (in-country) to this person or in which this person acts as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to this person.