The US government is accusing Chinese vendor ZTE of using a complex scheme of subsidiaries to get around Iranian sanctions, and has therefore slapped export controls on the company.

A notice at the Federal Register [PDF] describes documents obtained by the USA. In those documents, ZTE referred to import and export control "risk avoidance."

The government claims ZTE Kangxun Telecommunications, a company called Beijing 8-Star, and ZTE Parsian were the subsidiaries involved in the scheme.

ZTE Kangxun Telecommunications would buy controlled items "and provide them to a Chinese intermediary trading company for reexport to Iran," the notice says. Beijing 8-Star was designated to sign contracts at the Iranian end of the pipeline, buy the products, and re-export them to Iran; while ZTE Parisian provided engineering services to the customers.

China's government is unhappy with the ruling, with Foreign Ministry spokesperson Hong Lei telling a news briefing "China is opposed to the US citing domestic laws to place sanctions on Chinese enterprises ... We hope the US stops this erroneous action and avoids damaging Sino-US trade cooperation and bilateral relations."

The company has also responded with this statement, in which it says "ZTE is fully committed to compliance with the laws and regulations in the jurisdictions in which it operates. ZTE has been cooperating, and will continue to cooperate and communicate with all US agencies as required. The company is working expeditiously towards resolution of this issue."

As well as smartphones, ZTE supplies mobile infrastructure such as base stations and antennas.

If the sanctions stand, the decision will reach far beyond kit with the ZTE brand on it. Western firms like Microsoft, Intel, IBM and Honeywell are on its list of strategic partners, and Qualcomm supplies processors for its phones.

US vendors have been working hard in recent years to overcome Chinese suspicion of the American tech sector. Tensions between the countries have been cited by vendors such as Cisco as the reason for flat sales in the country. ®