The ban on supplying ZTE comes two months after two Republican senators introduced legislation to block the USA government from buying or leasing telecommunications equipment from ZTE or Huawei, citing concern the companies would use their access to spy on US officials.
ZTE, the China-based hardware and smartphone maker, has been banned from procuring electronic components from American suppliers by the US Department of Commerce.
The U.S. ban comes after ZTE failed to adhere to an agreement made with the government after it pleaded guilty previous year to illegally shipping goods to Iran and North Korea and paid $1.19 billion million in fines. It was fined $890 million and agreed to dismiss four members of senior staff, and to discipline 35 more.
But instead of punishing those involved, "ZTE paid full bonuses to employees that had engaged in illegal conduct, and failed to issue letters of reprimand", the Commerce Department said in a statement.
"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", Commerce Secretary Wilbur Ross said in a statement provided to TechCrunch.
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The warning from the NCSC coincides with new United States sanctions levied against ZTE which will prevent USA firms like chipmaker Qualcomm from selling to the company for the next seven years.
The ban comes two months after a motion in US Senate to block the government from buying or leasing telecommunications equipment from ZTE or its Chinese rival Huawei over accusations that the companies might be spying on American officials.
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. President, Donald Trump, accused China along with Russian Federation on the issue of devaluation of the currency.
As U.S. concerns about safeguarding its chip technology and cutting its trade deficit grow, the tech sector has become a flashpoint in the broader battle about trade and economic policy, with U.S. President Donald Trump accusing Chinese firms of intellectual property theft for years.
The US government's fining of ZTE was already the largest criminal penalty in American history in an export control case.
ZTE has sold handset devices to USA mobile carriers AT&T Inc, T-Mobile US Inc and Sprint Corp. "On the road forward, we must be steadfast in belief, have even more faith in the company and believe that we will be stronger after weathering the storm".