Common use of Sanctions and Export Control Laws Clause in Contracts

Sanctions and Export Control Laws. customers in Iran” without first obtaining the required export licenses. The shipped items included routers, microprocessors, and servers controlled under the Export Administration Regulations (EAR) for national security, encryption, regional security, and/or anti-terrorism reasons and were used to support projects in Iran involving the installation of cellular and landline network infrastructure. ZTE used third-party “isolation companies” to “purchase the embargoed equipment from suppliers and provide that equipment under the contract in an effort to distance ZTE from U.S. export-controlled products and insulate ZTE from U.S. export violations.” Ultimately, however, “ZTE itself purchased and shipped the embargoed goods,” “packag[ing] the U.S. items with its own self-manufactured items to hide the U.S.-origin goods.” ZTE also “undertook other actions involving 283 shipments of controlled items to North Korea with knowledge that such shipments violated the EAR.” Once the U.S. government began investigating ZTE’s Iran-related activities following a media report in March 2012, ZTE communicated to the U.S. government that it had wound down and ceased its Iran-related activities. However, “ZTE’s highest-level leadership decided to surreptitiously resume its Iran-related business in 2013, which continued until 2016, when the DOC suspended the company’s export privileges by adding it to the Entity List.” ZTE went so far as to mislead its own outside counsel and a forensic accounting firm that ZTE had retained to assist in the investigation by xxxxxxxx and concealing data and documents. ZTE took elaborate steps to conceal the prohibited transactions by forming a “Contract Data Induction Team,” consisting of 13 people who “destroyed, removed, or sanitized all materials concerning transactions or other activities relating to ZTE’s Iran business,” “deleted on a nightly basis all of the team’s emails to conceal the team’s activities,” and “required each of the team members to sign a non-disclosure agreement covering the ZTE transactions and activities the team was tasked with hiding.”