The United States is imposing export restrictions on China's ZTE Corp and three other entities over an alleged scheme developed by the telecoms equipment maker to re-export controlled items to Iran, contrary to U.S. law, according to a U.S. notice on Monday.
The U.S. Commerce Department, in the public notice, cited ZTE documents that showed the mobile handset maker planned to use shell companies in the scheme, leading the department to impose export curbs that will make it harder for ZTE to acquire U.S. products.
ZTE would be able to appeal the decision, which the Commerce Department said will be effective beginning Tuesday.
Trading in shares of the telecom manufacturer, one of the world's largest, was halted in Hong Kong and Shenzhen pending the announcement before Asian markets closed for the day. U.S.-listed shares of ZTE,, traded higher in handful of trades in over-the-counter market.
Ahead of the Commerce Department decision, first reported on Sunday, Chinese officials earlier on Monday expressed anger over the U.S. move, which will require suppliers to apply for an export license before shipping any American-made equipment or parts to the company.
"China is opposed to the U.S. citing domestic laws to place sanctions on Chinese enterprises," Chinese Foreign Ministry spokesman Hong Lei told a daily news briefing.
The United States has long banned the sale of United States-made technology products to Iran as part of its sanctions, even as China maintains close diplomatic, economic, trade and energy ties with the Middle Eastern country.
The export curbs also apply to two of its Chinese affiliates, ZTE Kangxun Telecommunications Ltd and Beijing 8-Star, and an Iranian company, ZTE Parsian, the notice said.
It was not immediately clear what impact the restrictions would have on the telecom industry.
Analysts have said supply problems are likely for ZTE, whose strategic partners include Microsoft, Intel Corp, IBM and Honeywell International Inc.
It also has trading relationships with several U.S. companies, including Qualcomm and IBM, analysts said.