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Seagate received a record $300M penalties for doing business with Huawei in exports.

In response to Huawei's violations of export control regulations, data storage provider Seagate will pay the biggest single administrative fine in the history of the Bureau of Industry and Security (BIS) of the Commerce Department.

For their confessed violations of export administration restrictions relating the sale of more than 7.4 million hard disk drives to Huawei organizations from August 2020 through September 2021, subsidiaries Seagate Technology, of California, and Seagate Singapore International Headquarters have agreed to pay $300 million. According to the BIS, the hard disk drives are worth more than $1.1 billion.

As part of the settlement, Seagate also consented to a five-year suspended denial order and a multi-year audit requirement of its export control compliance program.

The BIS imposed limits on Huawei in August 2020 that prevented the sale of goods made abroad using U.S.-origin technology or software to the company. Huawei was a popular target for U.S. investigation beginning during the Trump administration. In contrast to its two rivals, which stopped doing business with Huawei in response to this event, Seagate declared that it will strengthen its ties to Huawei through a three-year strategic partnership arrangement.

In a press release, Seagate Chief Executive Dave Mosley stated, "[W]e believed we complied with all relevant export control laws at the time we made the hard disk drive sales at issue."

The BIS disagreed, encouraged by politicians. According to the regulator, Seagate sold hard disk drives in violation of export control laws 429 times.

The BIS projected that Seagate's net earnings for the exports to or involving Huawei would be more than double the amount of the record penalty imposed by the BIS.

According to the agency's statement, Assistant Secretary for Export Enforcement Matthew Axelrod said, "This settlement is a clarion call about the need for companies to comply rigorously with BIS export rules, as our enforcement team works to ensure both our national security and a level playing field."

Companies are "now on notice" over violations of the foreign direct product (FDP) rule limits, according to John Sonderman, director of the Office of Export Enforcement.

According to Sonderman, "Any company exporting to an entity subject to the additional FDP rule restrictions needs to evaluate its entire manufacturing process to determine if specified U.S. technologies or software were used in building the essential tools used in production. Companies that discover violations should submit voluntary self-disclosures."

"We believe entering this agreement with BIS and resolving this matter is in the best interest of Seagate, our customers, and our shareholders," Mosley added. "Integrity is one of our core values, and we have a strong commitment to compliance as evidenced by our global team of international trade compliance and legal professionals—complemented by external experts and outside counsel. … We are now moving forward fully focused on executing our strong technology roadmap to support the growing demand for mass data storage solutions."



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