Seagate, a leading computing storage manufacturer, has agreed to pay a staggering $300 million penalty imposed by the US Department of Commerce (DOC) for shipping over $1.1 billion worth of hard disk drives (HDDs) to Chinese tech giant Huawei. This fine, the largest standalone penalty ever issued by the Bureau of Industry and Security (BIS), follows an investigation that revealed Seagate had shipped 7.4 million HDDs to Huawei between August 2020 and September 2021 without obtaining an export license.
The export control restrictions were introduced in August 2020 to prevent sales to Huawei, which was placed on the Entity List in May 2019. Despite these regulations, Seagate claimed its HDDs were not subject to the restrictions and continued to supply Huawei, ultimately becoming the company’s sole provider of HDDs.
Seagate Faces Consequences for Ignoring Export Control Restrictions
Matthew Axelrod, Assistant Secretary for Export Enforcement, stated that even after Huawei was placed on the Entity List for national security concerns, Seagate continued sending hard disk drives to the company. The $300 million fine is more than double the profits Seagate earned from selling the HDDs to Huawei.
As part of the settlement, Seagate will pay the fine in quarterly installments of $15 million over five years, starting from October 31, 2023. The company has 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.
Seagate CEO Dave Mosley stated that while the company believed it had complied with all relevant export control laws when it made the HDD sales, they determined that settling this matter with BIS was the best course of action.
The Largest Standalone Administrative Penalty in BIS History
This historic foreign direct product enforcement case and settlement mark a new milestone for BIS, emphasizing the importance of compliance with US export control rules. As the largest standalone administrative penalty in the agency’s history, it sends a clear message to companies about the need for rigorous adherence to export regulations.
With this case, the Department of Commerce has demonstrated its commitment to robust and stringent enforcement of US export controls worldwide. Companies that discover violations should submit voluntary self-disclosures to the Office of Export Enforcement (OEE) to avoid potential penalties and consequences.
