Seagate faces $300M Fine for Violating Huawei Export Regulations

STX Stock

Seagate Technology(STX:NSD) was fined $300 million by the Bureau of Industry and Security (BIS) of the US Department of Commerce for violating export controls. Seagate continued to sell hard disc drives to Huawei, a Chinese technology company, despite the US imposing stringent export controls on Huawei. It’s the highest penalty the BIS has ever imposed.

Due to national security and foreign policy concerns, Huawei and some of its non-US affiliates were added to the US Entity List in 2019. In response, in August of 2020, the BIS imposed restrictions on the sale of certain foreign-made items incorporating US technology to Huawei. From August 2020 to September 2021, Seagate continued to ship over 7.4 million hard drives to Huawei. Two other suppliers of hard drives to Huawei ceased shipments in compliance with the new regulations that went into effect in 2020, leaving Seagate as the sole provider.

Seagate has consented to pay the $300 million fine in quarterly installments of $15 million for five years. The initial installment is due in October. Seagate has also consented to three audits of its compliance program and confronts a five-year export privilege suspension order. Dave Mosley, the chief executive officer of Seagate, stated, “Although we believed we complied with all applicable export control laws at the time of the in question hard disc drive sales, we determined that engaging with BIS and resolving this matter was the best course of action.”

Due to the resolution with BIS, Seagate has postponed the announcement of its fiscal third-quarter results until April 20, 2023, as opposed to April 19, 2023, after the market close.

 

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