After a U.S. Commerce Department ruling in March that placed some of the toughest ever restrictions on a foreign company, Chinese telecommunications hardware group ZTE Corp have announced on Thursday that they have won a further reprieve on export restrictions until February next year.
The U.S. hit ZTE with the restrictions after the company allegedly broke sanction rules regarding Iran, but has since issued various reprieves that have seen the company continue to do business on U.S. shores.
Some of the latest reprieves come after the Chinese firm appointed Mathew Bell as its new legal counsel and chief compliance officer for ZTE USA, the company’s U.S. subsidiary. Mr. Bell will now be responsible for global sanction rules and other export control laws.
Should the restrictions ever be permanently imposed on ZTE it would severely hamper their ability to reach a large part of their supply line. 75 percent of their parts currently come from U.S. component makers and software firms.
At the close of trading on the New York Stock Exchange ZTE shares were down nearly 2 percent and have suffered a 40 percent loss for 2016 in total due to uncertainty over the rulings.
“What ZTE really needs if they are going to fully recover stock prices is a complete and permanent removal of the restrictions,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a Bloomberg interview. “The best they can hope for in those circumstances would be to get away with a small penalty fee for the firm and get back to business.”
Many observers were confident that if the Chinese network equipment and smartphone maker failed to get a quick ruling on the ban they would switch to non-U.S. sources, but the company have continued to source parts from companies like Qualcomm Inc leading analysts to believe ZTE will continue to work hard to get the restrictions permanently repealed.
