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It’s the largest standalone penalty ever issued by the Bureau of Industry and Security.
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Photo by Justin Sullivan/Getty Images
Computing storage manufacturer Seagate has agreed to pay a $300 million penalty imposed by the US Department of Commerce (DOC) for shipping over $1.1 billion worth of hard disk drives to Huawei, violating export control restrictions. An investigation by Commerce’s Bureau of Industry and Security (BIS) determined that Seagate shipped 7.4 million hard drives to Huawei between August 2020 and September 2021 without obtaining an export license, despite a rule introduced in August 2020 that restricts sales to the Chinese company.
The $300 million penalty is the largest fine ever imposed by the BIS that isn’t tied to a criminal case. The BIS says it’s more than double Seagate’s profits in selling the hard drives.
Huawei was first placed on the Entity List, a US trade blacklist, in May 2019 amid concerns the company’s communications technology could help the Chinese government spy on American networks. These restraints were expanded in August 2020 when BIS imposed a license requirement on certain foreign-produced items made with US technology being sold to Huawei. Seagate claimed its hard drives were not subject to the restrictions (according to Reuters), and continued to do business with Huawei, becoming the company’s sole provider of HDDs.
“Even after Huawei was placed on the Entity List for conduct inimical to our national security, and its competitors had stopped selling to them due to our foreign direct product rule, Seagate continued sending hard disk drives to Huawei,” said Matthew Axelrod, Assistant Secretary for Export Enforcement.
Under the terms of the settlement, Seagate will pay the $300 million fine in quarterly installments of $15 million over five years, starting from October 31, 2023. The company also agreed to a multi-year audit and a five-year suspended “denial order,” which can activate and prevent Seagate from exporting products if it fails to pay any installments or complete its audit requirements.
“We believe entering this agreement with BIS and resolving this matter is in the best interest of Seagate, our customers and our shareholders,” said Seagate CEO Dave Mosley in a statement. “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.”