In response to its violation of the terms in a 2017 Justice Department settlement,  the Department of Commerce’s Bureau of Industry and Security has imposed a denial of export privileges against Zhongxing Telecommunications Equipment Corp. of Shenzhen, China and ZTE Kangxun Telecommunications of Hi-New Shenzhen, China. Secretary of Commerce Wilbur Ross announced the decision on April 18.

The government’s action means that American companies are prohibited from selling parts and software to ZTE for seven years.

Denial Orders are issued by the assistant secretary for Export Enforcement of the Bureau of Industry and Security (BIS), denying the export privileges of a company or individual. A denial of export privileges prohibits a person from participating in any way in any transaction subject to the order. It is unlawful for other businesses and individuals to participate in any way in an export transaction subject to the restrictions placed on a denied person.

Ross stressed that “this is a regulatory action and is unrelated to any ongoing trade-related actions.”

BIS is the principal agency involved in the implementation and enforcement of export controls for commercial technologies and many military items. The BIS Office of Export Enforcement detects, prevents, investigates and assists in the sanctioning of illegal exports of such items.

In March 2017, ZTE agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after, as alleged by U.S. commerce officials, illegally shipping telecommunications equipment to Iran and North Korea, making false statements, and obstructing justice by misleading, the U.S. Government. In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met, or if the company committed additional violations of the Export Administration Regulations (EAR).

The Department of Commerce says it has now determined ZTE made false statements to BIS in 2016, during settlement negotiations, and 2017, during the probationary period, related to senior employee disciplinary actions the company said it was taking or had already taken. “ZTE’s false statements only were reported to the U.S. Government after BIS requested information and documentation showing that employee discipline had occurred,” the Commerce Dept. says.

“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.” Ross said in a statement. These false statements, he said, covered up the fact that ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.

 “Instead of reprimanding ZTE staff and senior management, ZTE rewarded them,” Ross added.