April 19 Reuters) – Seagate Expertise Holdings PLC (STX.O) has agreed to pay a $300 million penalty in a settlement with U.S. authorities for transport over $1.1 billion value of laborious disk drives to China’s Huawei in violation of U.S. export management legal guidelines, the Division of Commerce mentioned on Wednesday.
Seagate offered the drives to Huawei between August 2020 and September 2021 regardless of an August 2020 rule that restricted gross sales of sure overseas gadgets made with U.S. expertise to the corporate. Huawei was positioned on the Entity Record, a U.S. commerce blacklist, in 2019 to cut back the sale of U.S. items to the corporate amid nationwide safety and overseas coverage considerations.
The penalty represents the most recent in a string of actions by Washington to maintain subtle expertise from China that will help its navy, allow human rights abuses or in any other case threaten U.S. safety.
Seagate shipped 7.4 million drives to Huawei for a few yr after the 2020 rule took impact and have become Huawei’s sole provider of laborious drives, the Commerce Division mentioned.
The opposite two main suppliers of laborious drives ceased shipments to Huawei after the brand new rule took impact in 2020, the division mentioned. Although they weren’t recognized, Western Digital Corp (WDC.O) and Toshiba Corp (6502.T) have been the opposite two, the U.S. Senate Commerce Committee mentioned in a 2021 report on Seagate.
The businesses didn’t reply to requests for remark.
Even after “its rivals had stopped promoting to them … Seagate continued sending laborious disk drives to Huawei,” Matthew Axelrod, assistant secretary for export enforcement on the Commerce Division’s Bureau of Trade and Safety mentioned in a press release. “Right now’s motion is the consequence.”
Axelrod mentioned the executive penalty was the biggest within the historical past of the company not tied to a legal case.
Seagate’s place was that its foreign-made drives weren’t topic to U.S. export management rules, primarily as a result of they weren’t the direct product of U.S. tools.
“Whereas we believed we complied with all related export management legal guidelines on the time we made the laborious disk drive gross sales at concern, we decided that … settling this matter was one of the best plan of action,” Seagate CEO Dave Mosley mentioned in a press release.
In an order issued on Wednesday, the federal government mentioned Seagate wrongly interpreted the overseas product rule to require analysis of solely the final stage of its manufacturing course of somewhat than the whole course of.
Seagate made drives in China, Northern Eire, Malaysia, Singapore, Thailand, and the USA, the order mentioned, and used tools, together with testing tools, topic to the rule.
In August, the U.S. Division of Commerce despatched the corporate a “proposed charging letter,” warning the corporate that it might have violated export management legal guidelines. The letter kicked off some eight months of negotiations.
Reuters broke information of the charging letter in October.
Seagate’s $300 million penalty is due in installments of $15 million per quarter over 5 years, with the primary cost due in October. It additionally agreed to 3 audits of its compliance program, and is topic to a five-year suspended order denying its export privileges.
The corporate mentioned in gentle of the settlement it might report its fiscal third quarter 2023 monetary outcomes earlier than the market opens on Thursday, somewhat than a earlier plan for after the shut of commerce.
Reporting by Karen Freifeld; enhancing by Chris Sanders and Grant McCool
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