Why doesn't the item branch lot status default work when receiving additional quantity on existing l

We have set the item branch lot status code to put all lots created for a certain branch plant on hold.  We found that if we receive in additional quantity of a lot which existed prior to setting the lot status default, that the lot does not get put on hold even though it is a new receipt.   Is this working correctly?   Does the code track when the lot status default was entered and not apply to any lot number created prior to that date?

Any detailed info on how the Item Branch Lot Status functionality works would be appreciated.