DOJ probing Huawei over possible sanctions violations

Posted April 26, 2018

The U.S. Treasury Department's Office of Foreign Assets Control, or OFAC, which enforces sanctions, and the Department of Commerce are also looking into Huawei's transactions. The U.S. government effectively barred the Chinese firm from buying American technology in a move that will severely impact ZTE's ability to produce its own smartphones, and could send shockwaves throughout the rest of the smartphone supply chain.

ZTE pleaded guilty in March 2017 and agreed to pay a $1.19 billion penalty for having shipped equipment to Iran and North Korea in violation of US regulations.

The U.S. government's investigation into sanctions violations by ZTE following reports by in 2012 that the company had signed contracts to ship millions of dollars' worth of hardware and software from some of the best-known U.S. technology companies to Iran's largest telecoms carrier. This is just the latest action against Iran, which has always been blocked from selling telecom equipment to USA carriers by the US government. The probe was first reported by the Wall Street Journal on Wednesday. Though this does tell us that the U.S. government is interested in how the company behaves at an global level.

Huawei would not comment on the Journal report.

Separately, the Federal Communications Commission voted unanimously last week to ban federal funds from being used to purchase networking gear from companies determined to be a national security risk, dealing another blow to ZTE and Huawei. Ciena and Infinera, of course, compete with both Huawei and ZTE in global markets (except China). AT&T Inc. and Verizon Communications Inc., the biggest USA carriers, dropped plans to sell Huawei's latest smartphones.

Both companies also have been under scrutiny by USA lawmakers over cybersecurity concerns. Still, another setback in the United States market could cause Huawei to throw in the towel and concentrate on other regions.