US regulators have slapped Chinese telecom ZTE with what could be a stunning penalty - a seven-year ban on buying and exporting parts and technology from U.S. companies, after it was discovered the firm violated the terms of a 2017 settlement.

US Secretary of Commerce Wilbur Ross announced the ban on Monday (16 April). His statement said the US government had discovered that ZTE made false statements in 2016 during settlement negotiations as well as in 2017 during its probation regarding discipline taken against senior employees involved in misconduct.

ZTE's March 2017 settlement was reached after the company pleaded guilty to three counts of illegally shipping telecoms and surveillance equipment to Iran and North Korea in violation of US export controls, making false statements and obstructing justice.

In the plea deal with the US Department of Justice, ZTE agreed to a combined civil and criminal penalty of up to $1.2bn. It also agreed to accept a corporate monitor; and, in a side settlement with the US Department of Commerce, it accepted the seven-year export ban.

But part of the financial penalty and the ban were suspended, so long as the company abided by the terms of its plea deal and the settlement. Ross reinstated the ban on Monday, issuing a denial order that prohibits the company, through its two Chinese subsidiaries, from exporting parts from the US.

ZTE, which did not immediately respond to a message seeking comment, issued this statement: "ZTE is aware of the denial order activated by the United States Department of Commerce.  At present, the company is assessing the full range of potential implications that this event has on the company and is communicating with relevant parties proactively in order to respond accordingly."

Wendy Wysong, CC's Asia Pacific anti-corruption and trade controls head, represented ZTE during the plea deal and settlement. She declined to comment on her role.

Wysong, who splits her time between CC's Washington DC and Hong Kong offices, has been at the magic circle firm since 2007, when she joined from the US Department of Commerce's Bureau of Industry & Security.

Ross' statement said ZTE covered up the fact that the company, contrary to settlement terms, had paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand.

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

It is not clear how severely the ban could impact the company's sales or whether it can negotiate its way out of the ban again by meeting the terms of the settlement. When the ban originated last year, experts claimed it could cripple the company if not suspended.

ZTE, which also has a subsidiary in Richardson, Texas, is the fourth-largest supplier of mobile phones in the US and the second-largest provider of prepaid phones, according to its website. It makes other smart devices, such as watches and projectors, as well as routers and other internet technology.

Its main US suppliers included Intel, Microsoft and Qualcomm, which furnished its processors.

The prosecution of ZTE last year came after its former US general counsel, Ashley Yablon, agreed to be a whistleblower for the US attorney. Yablon has since joined another company as in-house counsel.

The ban comes at a tumultuous time for US-China trade relations, as President Donald Trump last month enacted tariffs on Chinese imports.

Other major law firms to have worked with ZTE in the past include Hogan Lovells, which has advised the company on its efforts to comply with its settlement with the US Government. The firm has also been advising the company on its long-running patent battle with telecoms operator Huawei.