J.E. Bartlett:  “BIS Gives ZTE a 30-Day Pass”

* Author:  Jim Bartlett, Esq., Principal, Law Office of James E. Bartlett III, PLLC, and Partner, Full Circle Compliance, B.V., 202-802-0646,JEBartlett@JEBartlett.com.

On 2 July 2018, a Limited Authorization pursuant to 15 CFR 764.3(a)(2) was signed by the Director of the Office of Exporter Services, DOC/BIS.  The Limited Authorization is in effect a “30-day pass” allowing the maintenance of ZTE networks and equipment lawfully obtained before 15 April 2018, , the service and support of ZTE telephone handsets, the disclosure of information to ZTE regarding security vulnerabilities in items owned, possessed, or controlled by ZTE, and the payment to or from ZTE for those authorized transactions.  It does not does not amend the ZTE Denial Order of 15 April 2018 or the Superseding Order of  8 June 2018.  Although the Superseding Order provided that the Denial Order would be lifted upon ZTE’s payment of $1 Billion fine and deposit of a $400,000 escrow amount, BIS has not yet announced the lifting of the Denial Order.

The Limited Authorization authorizes the following four activities previously prohibited by the BIS ZTE denial order of 15 April 2018.  These activities may be performed only until 1 August 2018.  Below is a summary of the permitted activities:

(1) Maintaining and supporting existing networks and equipment under contracts and agreements with ZTE that were executed before 15 April 2018.  This includes providing software updates and patches.
(2) Servicing and supporting ZTE telephone handsets that were available to the public before 15 April 2018.  This includes providing software updates and patches.
(3) Disclosing information to ZTE regarding security vulnerabilities in items owned, possessed, or controlled by ZTE if it is related to maintaining the integrity and reliability of communications networks and equipment.
(4) Making payments to and receiving payments from ZTE for the specific transactions permitted by this Limited Authorization.

All permitted transactions are subject to the standard licensing requirements of the EAR.  All other exports, reexports, in-country transfers, and activities prohibited by the ZTE denial order of 15 April 2018 that are not specifically authorized by the Limited Authorization remain prohibited unless authorized in writing by DOC/BIS.

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