US Imposes $300 Mln Penalty On Seagate For Violating Export Restrictions

(RTTNews) - U.S. authorities imposed a $300 million civil penalty against two subsidiaries of Seagate Technology Holdings Plc. (STX) to resolve alleged violations of U.S. export controls related to selling hard disk drives (HDDs) to Huawei Technologies Co. Ltd. The resolution also includes a multi-year audit requirement and a five-year suspended Denial Order.

In August 2020, the U.S. Department of Commerce's Bureau of Industry and Security or BIS imposed controls over certain foreign-produced items related to Huawei. Despite this, in September 2020, Seagate announced it would continue to do business with Huawei. 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. Subsequently, Seagate entered into a three-year Strategic Cooperation Agreement with Huawei.

Bureau of Industry and Security's investigation determined that Seagate engaged in conduct prohibited by the Export Administration Regulations by ordering or causing the reexport,export from abroad, or transfer (in-country) of more than 7.4 million HDDs subject to the Huawei foreign direct product rule without BIS authorization.

In 2019, Huawei and certain of its non-U.S. affiliates were added to the Entity List, imposing licensing requirements on exports, reexports, and transfers (in-country) of all items subject to the Export Administration Regulations destined to or involving the listed Huawei entities.

As per BIS's Proposed Charging Letter, between August 17, 2020, and September 29, 2021, Seagate US and Seagate Singapore, working with other Seagate entities, engaged in conduct prohibited by the Export Administration Regulations on 429 occasions.

Seagate ordered or caused the reexport, export from abroad, or transfer (in-country) of about 7.42 million foreign-produced HDDs, valued at about $1.10 billion to Huawei entities listed on the BIS Entity List or where such entities were a party to a transaction without authorization from BIS.

The two other companies capable of making HDDs promptly—and publicly—indicated that they had ceased sales to Huawei. Of the three, only Seagate refused to stop sales and transactions involving Huawei.