The Department of Commerce’s Bureau of Industry and Security (“BIS”) announced a final rule, effective today, March 29, 2017, to amend the Export Administration Regulations (“EAR”) to remove Zhongxing Telecommunications Equipment Corporation (“ZTE”) and its subsidiary, ZTE Kangxun Telecommunications Ltd. (“ZTE Kangxun”), from the Entity List. ZTE and ZTE Kangxun were originally placed on BIS’s Entity List on March 8, 2016.

BIS’s decision to delist these two entities follows ZTE’s recent settlement of administrative and criminal enforcement actions with the U.S. Department of Justice, BIS, and U.S. Treasury Department’s Office of Foreign Assets Control, in which ZTE agreed to pay $1.19 billion in penalties for violations of the U.S. sanctions against Iran and U.S. export controls, making false statements to the U.S. government, and obstruction of justice. This settlement is discussed in more detail in our recent blog post. As a result of this delisting, the general license to temporarily authorize exports, reexports, and transfers to ZTE and ZTE Kangxun was removed from the EAR. Two other ZTE entities, Beijing 8-Star and ZTE Parsian, remain on the Entity List, and all items (i.e., goods, software, technology) subject to the EAR require a license to be exported, reexported, or transferred to these entities.

In addition to the two removals, the final rule also added Shi Lirong, former CEO of ZTE, to the Entity List for actions contrary to U.S. national security or foreign policy interests. As a result, all items subject to the EAR will require a license to export, reexport, or transfer to Shi Lirong and such license applications will be reviewed on a policy of denial. Shi Lirong was ZTE’s CEO at the time of the violations and he signed the documentation describing ZTE’s scheme to establish, control, and use a series of shell companies to illicitly reexport controlled items to Iran in violation of U.S. export control laws. His designation on the Entity List illustrates how violations of U.S. export control laws pose risks of significant administrative sanctions for individuals as well as entities.