Seagate Technology May Have Broken Export Rules Selling Hard Drives to Blacklisted Company: US Officials

The seal of the Department of Commerce is pictured in Washington on March 10, 2017. (Eric Thayer/Reuters)

U.S. officials have accused Seagate Technology Holdings of potentially violating export control laws by selling hard disk drives to a customer on a U.S. trade blacklist.

Seagate, which manufactures computer hard drives, announced in a filing with the U.S. Securities and Exchange Commission on Oct. 26 that it had received a “proposed charging letter” from the U.S. Commerce Department’s Bureau of Industry and Security on Aug. 29 (pdf).

The letter alleges that the Dublin-based company, which also operates in California, “acted in violation” of the U.S. Export Administration Regulations, which govern the export and re-export of some commodities as well as software and technology.

It allegedly did so by “providing Seagate hard disk drives (HDDs) to a customer and its affiliates listed on the BIS Entity List between August 2020 and September 2021,” the Seagate filing states.

Under U.S. law, companies operating in the United States that plan to sell certain commodities or do business with other companies that are on the government’s entity list are required to obtain a special license beforehand.

Seagate on Wednesday said it had responded to the proposed charging letter, stating it “did not engage in prohibited conduct as alleged by BIS, because, among other reasons, Seagate’s HDDs are not subject to the EAR.”

“The matters raised by the PCL remain unresolved at this time, and there can be no assurance as to the timing or terms of any final outcome,” the company said, adding that it is unable to estimate the range of loss or penalty, if any.

It noted, however, that the outcome of the issue could have a material impact on the business operations, financial condition, and cash flows.

“Seagate believes it has complied with all relevant export control laws and regulations. Seagate has committed to compliance through its global team of international trade compliance and legal professionals and by maintaining robust trade controls compliance policies and procedures,” the company said. “Seagate has been cooperating with BIS and intends to continue to engage with BIS to seek a resolution of this matter.”

Alleged Dealings With Blacklisted Company

Seagate’s filing did not identify the alleged blacklisted customer.

However, in October 2021, the U.S. Senate Committee on Commerce, Science, and Transportation released a report (pdf) alleging that Seagate had continued selling hard disk drives containing semiconductors to Huawei Technologies Co. Ltd. after the company was placed on a U.S. trade blacklist.

Huawei and its affiliates have been on the U.S. Commerce Department’s entity list since 2019 and are banned from receiving technology and software produced domestically and abroad without government approval, owing to the company’s threat to national security and foreign policy.

The report states that the committee found evidence that suggests that Seagate Technology “continued shipping hard disk drives to Huawei after the rule went into effect.”

“Seagate officials told Minority Staff that the company does not hold a valid license to continue shipping hard disk drives to Huawei, likely making transactions for this product unlawful after the effective date,” the report states.

Seagate Benefitted From ‘Uneven Playing Field’

“By shipping these prohibited products to Huawei, it appears Seagate benefitted from an uneven playing field to the detriment of national security and at the expense of its competitors who abide by the rule designed to combat threats posed by companies with known connections to the Chinese government,” the Senate report added.

In a statement to Reuters, a spokesperson for the U.S. Commerce Department declined to comment on the potential violation but said the department is committed to “fully investigating any allegation of violations” pertaining to the rules on certain foreign-made items, adding that it “aggressively pursues criminal and civil actions related to unauthorized exports to China.”

According to Reuters, Seagate could face fines of up to $300,000 per violation, or twice the value of each transaction—whichever is greater—for administrative charges.

The Epoch Times has contacted the U.S. Commerce Department for comment.