On March 8, 2016, the US Department of Commerce Bureau of Industry and Security (BIS) published a Federal Register notice adding four ZTE entities to the BIS Entity list. Three of the entities are located in China and one is located in Iran. The Chinese entities are: (1) Beijing 8-Star International Co., (2) Zhongxing Telecommunications Equipment (ZTE) Corporation; and (3) ZTE Kangxun Telecommunications Ltd. The Iranian entity is ZTE Parsian.
The Entity List designation for these entities states that any “item that is subject to the Export Administration Regulations” will require a BIS license for export, re-export, or in-country transfer to any of the four entities. A license requirement also exists for any transaction in which one of the four named entities “act as purchaser, intermediate consignee, ultimate consignee, or end user of items subject to the EAR”. In addition, the licensing policy for such applications will be a presumption of denial, meaning that licenses will not be approved without a compelling reason for the US government to overcome the presumption. Similarly, license exceptions are not available for exports, reexports or in-country transfers of items subject to the Export Administration Regulations to the four entities.
“Items subject to the Export Administration Regulations” include the following:
- All US origin items wherever located in the world.
- Any item in the United States and being exported to any of these entities from the United States.
- Any foreign made item that contains more than 25% US origin “controlled” content (or 10% if exported or reexported to Iran, North Korea, Sudan, or Syria) (the so-called “de minimis” rule).
- Any foreign made item that is the direct product of US origin technology or major plant and equipment located abroad, where the foreign-made product and the US origin technology or major plant and equipment are controlled for “national security” reasons.