The Commerce Department determined ZTE, which was previously fined for shipping telecommunication equipment to Iran and North Korea, subsequently paid full bonuses to employees who engaged in the illegal conduct, failed to issue letters of reprimand and lied about the practices to US authorities, the department said. "Instead of reprimanding ZTE staff and senior management, ZTE rewarded them".
"In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice including through preventing disclosure to and affirmatively misleading the U.S. government", claimed the Department of Commerce in a statement.
Unlike the USA, which de facto banned Huawei and ZTE from competing to provide telco infrastructure back in 2012, United Kingdom firms have embraced partnerships with the former, with the blessing of government.
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.
But the Chinese company admitted in March that while it had fired the four senior employees, it had not disciplined or reduced bonuses to the 35 others.
The US government has also banned US companies from working with ZTE due to a violation of sanctions and imposed a fine of $1.2 billion (£837 million) in 2017.
It also comes amid heightened tensions between the USA and China, which are now engaged in a tit-for-tat exchange of possible tariffs.
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"ZTE misled the Department of Commerce", Commerce Secretary Wilbur L. Ross in a press release.
The U.S. action could be catastrophic for ZTE since American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes smartphones and gear to build telecommunications networks.
Following a report in the UK's Financial Times newspaper on Monday, the UK's National Cyber Security Centre (NCSC) published a brief statement on its website describing ZTE Corp. US President Donald Trump has already imposed tariffs on Chinese imports in recent weeks, and there is growing concern that China is racing ahead of the US in the all-important technology sector.
The U.K.'s national Cyber Security Centre warns the telecommunication companies of the country that, "National risks from ZTE equipment and services can not be mitigated". ZTE was a regular purchaser from Qualcomm Inc., Intel Corp., Acacia Communications and lumentum Holdings Inc.
ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp.