Seagate slapped with $300m fine for banned business with Huawei
The US Department of Commerce’s Bureau of Industry and Security (‘BIS’) announced that Seagate Technology Holdings Plc, the world’s largest maker of computer hard drives, will pay a $300 million civil penalty for alleged violations of export controls in selling millions of units to Huawei Technologies Co.
The penalty announced on 19 April is the largest stand-alone settlement in the history of the Bureau of Industry and Security.
According to BIS, Seagate sold hard disk drives (‘HDDs’) to Huawei Technologies in violation of the foreign direct product (‘FDP’) rule.
In August 2020, BIS imposed controls over certain foreign-produced items related to Huawei. Despite this, Seagate continued to do business with Huawei and entered into a three-year Strategic Cooperation Agreement with Huawei that named Seagate as ‘Huawei’s strategic supplier.’ It also granted it ‘priority basis over other Huawei suppliers’.
‘Seagate did so despite the fact that its only two competitors had stopped selling HDDs to Huawei, resulting in Seagate becoming Huawei’s sole source provider of HDDs,’ BIS said. Seagate sold the drives to Huawei between August 2020 and September 2021.
BIS added: ‘As alleged in the Proposed Charging Letter, BIS’s investigation determined that Seagate engaged in conduct prohibited by the Export Administration Regulations (EAR) by ordering or causing the reexport, export from abroad, or transfer (in-country) of more than 7.4 million HDDs subject to the Huawei FDP rule without BIS authorization.’
In addition to the $300 million civil penalty, Seagate also agreed to a multi-year audit requirement and a five-year suspended denial order. Seagate admitted to the charges as part of the settlement.
‘This settlement is a clarion call about the need for companies to comply rigorously with BIS export rules,’ said Assistant Secretary for Export Enforcement Matthew Axelrod. ‘Today’s action is the consequence: the largest standalone administrative resolution in our agency’s history.’
From its company headquarters in Fremont, California, Seagate said it believed it was complying with relevant laws.
‘While we believed we complied with all relevant export control laws at the time we made the hard disk drive sales at issue, we determined that engaging with BIS and settling this matter was the best course of action,’ the company said in a press release.
