The U.S. Commerce Department imposed the ban following ZTE's violation of an agreement on punishing employees that was reached after it was caught illegally shipping U.S. goods to Iran.
As part of the agreement, Shenzhen-based ZTE promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior US officials told Reuters.
Last night, U.S. Commerce Department's Bureau of Industry and Security (BIS) has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corporation, which is popularly known as China's ZTE and based in Shenzhen in response to repeated false statements to the U.S. government during negotiations.
According to reports, part of the deal ZTE had made with the US government was that it would not give bonuses to employees who had acted illegally in the past, but it failed to follow through on that promise.
Washington has also deepened its scrutiny of Chinese investment in the US, with the Committee on Foreign Investment in the United States (CFIUS), blocking many proposed acquisitions of USA assets by Chinese companies.
In March, ZTE admitted that while it had fired four senior employees, it had not disciplined or reduced bonuses to 35 others.
"This will be devastating to the company, given their reliance on USA products and software", Douglas Jacobson, an exports control lawyer who represents suppliers to ZTE, said of the ban on supplying the company.
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Having suffered a loss of 767.8 million Chinese yuan ($122 million) in 2016, ZTE bounced back with a net profit of more than RMB6.7 billion ($1.1 billion) a year ago, with sales up 7.5%, to RMB108.8 billion ($17.3 billion).
It also comes amid heightened tensions between the US and China, which are now engaged in a tit-for-tat exchange of possible tariffs.
"ZTE misled the Department of Commerce", Ross said in a statement.
The UK's National Cyber Security Centre (NCSC) has warned that one of China's biggest telecoms infrastructure and smartphone firms is a national security risk. To add to the woes, the Britain's National Cyber Security Centre (NCSC) has written to United Kingdom telecoms providers warning them that the use of ZTE's equipment and services could pose a national security risk, the BBC reported. Last year ZTE sold 46.4 million smartphones with half of the phones using Qualcomm chips. The technology bought by the company includes components central to its products. ZTE has purchased chips from Qualcomm Inc.
"The UK telecommunications network already contains a significant amount of equipment supplied by Huawei, also a Chinese equipment manufacturer", Levy wrote in a letter to the telecoms sector, according to the FT.
ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.