In 2017, the USA government entered into a $1.19 billion settlement agreement with ZTE regarding their violation of sanctions by selling Iran and North Korea goods originating from the United States. But, the Commerce order said, ZTE "argued that it would have been irrational for ZTE to knowingly or intentionally mislead the USA government in light of the seriousness of the suspended sanctions".
Severe action: The US ban threatens ZTE viability as the company is estimated to receive 25 to 30 percent of its components from US firms.
Viavi Solutions (VIAV) is one company that has business with ZTE, though only a small amount, according to William Blair analyst Dmitry Netis.
The move followed ZTE's agreement last March to pay $1.19 billion (£830m) in fines as part of a settlement of the sanctions charges.
The agency found the company misled the department's Bureau of Industry and Security in 2016 and 2017 - during and after settlement negotiations - about disciplinary measures taken against senior employees.
The company was meant to reprimand employees that had participated in illegal conduct but instead did not issue any letters of reprimand and paid bonuses to employees. ZTE has been buying the hardware from the United States companies and using in its products which are later shipped to Iran and North Korea. A few years back, both Huawei and ZTE came under scrutiny after the U.S government raised concerns over the national security.
According to Secretary of Commerce Wilbur L. Ross, Jr., ZTE made false statements to BIS in 2016 during the settlement agreement and later when an update was requested by the US government. "This egregious behaviour can not be ignored", said USA secretary of commerce Wilbur Ross. The punishment outlined by the "Denial Order" will last for a biblical seven years.
The Commerce Department action came amid calls for more aggressive moves by USA authorities against Chinese communications and telecom firms.
To alleviate concerns Huawei has even considered a plan to build a state-funded 5G network in the USA, according to the Financial Times.