The penalty comes after
a group of Senate Republicans in 2021 alleged the data-storage equipment
provider continued to sell hard drives to Huawei despite national-security
restrictions
By Dylan Tokar
Updated April 19, 2023 7:38 pm ET
Seagate continued to sell hard drives to Huawei despite tightened export controls imposed on Huawei in 2020, the Commerce Department said. Photo: Justin Sullivan/Getty Images
Two subsidiaries of Seagate Technology Holdings PLC
have agreed to pay $300 million for violating export restrictions placed on
Huawei Technologies Co. over fears the Chinese telecommunications company poses
a threat to U.S. national security.
The Dublin-based data-storage
equipment provider continued to sell hard drives to Huawei despite tightened
export controls imposed on the Chinese firm in 2020, the U.S. Commerce
Department said Wednesday. U.S. officials for years have voiced
concerns that Huawei’s equipment could be used to spy on Americans.
The fine is the largest stand-alone administrative penalty ever
imposed by the Commerce Department’s Bureau of Industry and Security, according
to the agency, which administers and enforces U.S. export controls.
Seagate in
a statement on Wednesday acknowledged the agreement, saying it had agreed to
admit to the Commerce bureau’s allegations partly in an effort to put the
matter behind it and to focus on its current business challenges and long-term
strategy.
“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,” Dave Mosley, Seagate’s chief
executive officer, said in the statement.
The national-security concerns around
Huawei, which the company has long denied, prompted the Commerce Department
under President Donald
Trump to place the Chinese company on the agency’s so-called “entity
list.” The designation blocks
companies from supplying U.S.-origin technology to Huawei without a
license.
The U.S. has since ratcheted up the
restrictions on Huawei. In 2020, the Commerce Department imposed
regulations that blocked the sale to Huawei of items produced abroad
using U.S.-origin technology or software.
It was those restrictions that Seagate
violated, according to the Commerce Department, when the company publicly
announced in September 2020 that it would continue to do business with Huawei.
The company at the time told investors it
didn’t believe it needed a license to continue selling to Huawei. It later
entered a three-year cooperation agreement with the Chinese company, making it
Huawei’s sole provider of hard disk drives.
“I don’t see any particular restriction for
us in terms of being able to continue to ship to Huawei or any other customers
in China,” Gianluca Romano, Seagate’s chief financial officer, said in
September 2020.
A group of Senate Republicans in 2021 released
a report alleging that Seagate had violated U.S. export controls and
called for the Commerce Department to better enforce its restrictions on
Huawei.
The Commerce Department on Wednesday said
that Seagate subsidiaries in California and Singapore ultimately provided more
than 7.4 million hard disk drives to Huawei entities in violation of the 2020
export rules. The hard disk drives were valued at about $1.1 billion, the
agency said.
The administrative order issued by the
Commerce Department places Seagate’s handling of U.S. technology under
increased scrutiny, including by requiring it to conduct a series of multiyear
audits.
The audits, which will take place in three
stages and involve an independent third-party consultant, will focus on
Seagate’s export controls compliance program, the Commerce Department said.
The Biden administration in recent months
has considered revoking
export licenses to other U.S. Huawei suppliers and cutting
off the Chinese firm from U.S technology altogether, according to
previous reporting by The Wall Street Journal.
Write to Dylan Tokar at dylan.tokar@wsj.com
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