Commerce bars U.S. companies from selling to ZTE

The U.S. Department of Commerce has banned American firms from selling components to the Chinese phone maker ZTE for seven years for violating the terms of a sanction.

The ban could significantly impact ZTE, which purchases 25 percent to 30 percent of components in its phones from U.S. companies, according to Reuters.

{mosads}The action comes in response to ZTE pleading guilty to violating sanction rules by conspiring to sell equipment to Iran. The U.S. government had previously granted temporary sanctions relief to ZTE before issuing the ruling.

ZTE has paid $890 million in fines and could see another $300 million in potential penalties.

Also as a part of its punishment, ZTE agreed to dismiss four senior employees and penalize 35 others by reprimanding them and reducing bonuses.

“ZTE made false statements to the U.S. Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation,” said Secretary of Commerce Wilbur Ross in a statement.

“ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored,” he said.

The move comes as the U.S. government cracks down on the presence of Chinese phone companies like ZTE and Huawei in the U.S.

Unlike Monday’s sanction through, the White House and Congress have justified actions to keep the companies from operating in the country as matters of national security.