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U.S. bans American companies from selling to Chinese phone maker ZTE

Reuters  |  WASHINGTON 

By and Karen Freifeld

(Reuters) - The is banning American companies from selling components to leading Chinese Corp for seven years for violating the terms of a sanctions violation case, U.S. officials said on Monday.

The Chinese company, a top seller in the United States, pleaded guilty last year in federal court in for conspiring to violate U.S. sanctions by illegally shipping U.S. goods and to It paid $890 million in fines and penalties, with an additional penalty of $300 million that could be imposed.

As part of the agreement, Shenzhen-based Corp promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them, senior Commerce Department officials told 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.

"provided information back to us basically admitting that they had made these false statements," said a senior department "That was in response to the U.S. asking for the information."

"We can't trust what they are telling us is truthful," the said. "And in international commerce, truth is pretty important."

officials did not immediately respond to requests for comment.

Douglas Jacobson, an exports control who represents suppliers to ZTE, called the ban highly unusual and said it would severely affect the company.

"This will be devastating to the company, given their reliance on U.S. products and software," said Jacobson. "It's certainly going to make it very difficult for them to produce and will have a potentially significant short and long-term negative impact on the company."

"This is going to tank their stock," Jacobson added.

has sold to U.S. mobile carriers AT&T Inc, and It has relied on U.S. companies including Qualcomm Inc, and for components.

The U.S. action against is likely to further exacerbate current tensions between and over trade. After the U.S. placed export restrictions on in 2016 for sanctions violations, the China's Ministry of criticized the decision.

A five-year federal investigation found last year that had conspired to evade U.S. embargoes by buying U.S. components, incorporating them into equipment and illegally shipping them to

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

The had allowed the company continued access to the U.S. market under the 2017 agreement. American companies are estimated to provide 25 percent to 30 percent of the components used in ZTE's equipment, which includes networking gear and

The U.S. government's investigation into sanctions violations by followed reports by in 2012 that the company had signed contracts to ship millions of dollars' worth of hardware and software from some of the best known U.S. companies to Iran's largest

(To read the report that exposed the practice, click

(Reporting by in New York and in London; Editing by Jeffrey Benkoe)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 16 2018. 19:27 IST