Chinese telecom equipment and smart phone maker ZTE Corp will appeal export restrictions imposed on it, according to a person familiar with the matter, seeking to unwind a ban on U.S. suppliers providing crucial components.
The restrictions, imposed by the U.S. Commerce Department on March 7 for alleged Iran sanctions violations, are likely to disrupt ZTE's global supply chain and could create substantial parts shortages.
A senior Commerce Department official told Reuters: "The U.S. Department of Commerce and ZTE Corp are in ongoing discussions. These discussions have been constructive, and we will continue to seek a resolution."
How long the appeals process might take remains unclear. It usually takes a year or more for export curbs to be removed for a company, but the U.S. government can act much more quickly.
ZTE did not immediately respond to a request for comment.
Trading in ZTE shares, which has been halted since March 7 in Hong Kong and Shenzhen, was expected to resume on Wednesday, according to the source, who declined to be identified because the information has not been made public.
Two other sources familiar with ZTE, which has been undertaking an extensive lobbying effort in Washington, said the company was blindsided by the severity of the trade ban.
"It's going to have a big impact on the company, that's for sure," said a source with direct knowledge of the situation, describing the ruling as "unexpected". A second source close to the company said the restrictions were more severe than expected.
In a statement last week, the Shenzhen, China-based company said it "has been working with associated U.S. government departments on investigations since 2012 and maintains constant communication with associated departments and is committed to fully address and resolve any concerns."
The Chinese government also has strongly criticised the export curbs.
The Commerce Department investigated ZTE for alleged export-control violations following reports by Reuters in 2012 that the company sold Iran a powerful surveillance system and millions of dollars in hardware and software from some of America's best-known technology companies.
Later that year, the U.S. Congress Permanent Select Committee on Intelligence recommended U.S. companies avoid using network gear from both ZTE and larger rival Huawei Technologies due to their alleged connections with China's communist government and military.
