USA government bans American companies from selling components to ZTE

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Shares of U.S. optical components makers fell on Monday after the U.S. Department of Commerce said it was banning companies from selling components to Chinese telecom equipment maker ZTE Corp for seven years.

Last year, ZTE plead guilty in a federal court for conspiring to illegally ship U.S. goods and tech to Iran, violating USA sanctions. After the USA placed export restrictions on ZTE in 2016 for Iran sanctions violations, the China's Ministry of Commerce and Foreign Ministry criticized the decision.

Reuters quotes a senior department official who said that the company "provided information back to us basically admitting that they had made these false statements".

These false statements covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand. "This egregious behavior can not be ignored". "That was in response to the US asking for the information".

ZTE, which devised elaborate schemes to hide the illegal activity, agreed to plead guilty after the Commerce Department took actions that threatened to cut off its global supply chain.

It had also promised to fire four senior employees and reprimand 35 others as part of the agreement but ZTE admitted in March that while it did fire the four employees, it didn't reprimand the others.

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The agreement called for the company to pay $892 million in fines and forfeitures and be subject to an additional $300 million in penalties if it violates the terms of the settlement.

ZTE officials did not immediately respond to requests for comment. It also makes it illegal for United States companies to sell components to ZTE.

Chinese smartphone maker ZTE has been hit with USA export restrictions related to charges that it illegally shipped telecom equipment to Iran and North Korea.

A lawyer representing suppliers to ZTE said that this ban is "highly unusual" and that it will be "devastating to the company".

"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 Ross.