U.S. Charges That Seagate Violated Export Regs to Ship Product to Chinese Company

The United States alerted Seagate Technology Holdings that it may have broken the law by selling hard drive disks to a blacklisted Chinese company, according to a new report. 

A source informed Reuters that the company at issue is Huawei. It is on the U.S. Commerce Department’s Entity List and is prohibited from purchasing exports from the U.S., as well as specific foreign-manufactured products, without being approved first by the government. 

A filing with the U.S. Securities and Exchange Commission reportedly states that Seagate was cautioned about this in a “proposed charging letter” from the Commerce Department at the end of August. The document also notes that Seagate contends that the hard disk drives are not under the U.S. export rules and acted lawfully. 

Seagate has said it is working with the agency and trying to settle the issue. It is a data storage business based in Dublin, Ireland, but it also works in California. 

The disclosure reportedly said that the items being discussed were given to the company and its partners from August 2020 to September 2021, but it didn’t name the customer, which Reuters’ source identified as China’s Huawei. The source said Seagate stopped sending products to Huawei a year ago.

Seagate could be charged with civil penalties of up to $300,000 for each violation or double the value of the deal. The source also said Seagate hopes to argue its side in a scheduled meeting with the Commerce Department. 

The law at issue is the Foreign Direct Product Rule, which was updated in August 2020. It doesn’t allow businesses to send products created in a foreign country to Huawei if made from U.S. software or technology. The rule was intended to “prevent Huawei’s attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology,” according to reporting on a Commerce Department press release. 

The source told Reuters that Seagate believes the products do not fall under the guidelines, but the Commerce Department is charging the company due to a broader interpretation of how a product falls under the rule. 

Last October, Republicans on the Senate Commerce Committee reported that Seagate had probably sent banned materials to Huawei for up to a year. 

Earlier this week, the Justice Department said it had charged Chinese intelligence authorities with trying to spy on a federal investigation being carried out into Huawei. Top law enforcement authorities also announced other unconnected legal steps taken against Chinese agents in the U.S. 

“The government of China sought to interfere with the rights and freedoms of individuals in the United States and to undermine our judicial system that protects those rights,” Attorney General Merrick Garland told the press. “We will continue to fiercely protect the rights guaranteed to everyone in our country.”