Washington

In a settlement with US authorities, Seagate Technology has agreed to pay a $300 million fine for selling hard disc drives worth more than $1.1 billion to China's Huawei in violation of US export control regulations, the Department of Commerce said on Wednesday.

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In spite of a law that restricted sales of some foreign products created with US technology to the company in August 2020, Seagate (STX) supplied the drives to Huawei between August 2020 and September 2021. As a result of concerns about its national security and foreign relations, Huawei was included to the Entity List, a US trade blacklist, in 2019.

The penalty is the most recent in a series of steps taken by Washington to prevent China from acquiring advanced technology that could bolster its military, permit human rights infractions, or otherwise endanger US security.

After the 2020 rule went into effect, Seagate supplied Huawei with all of its hard drives and shipped 7.4 million drives to the company, according to the Commerce Department.

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After the new rule went into force in 2020, the other two major hard drive providers stopped shipping to Huawei, according to the department. The other two, though they weren't named, were Western Digital (WDC) and Toshiba (TOSBF), according to a 2021 report on Seagate by the US Senate Commerce Committee.

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Requests for comments from the corporations received no responses, reported Reuters. 

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Even after “its competitors had stopped selling to them … Seagate continued sending hard disk drives to Huawei,” Matthew Axelrod, assistant secretary for export enforcement at the Commerce Department’s Bureau of Industry and Security said in a statement. “Today’s action is the consequence.”

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The administrative penalty, according to Axelrod, was the biggest in the organisation's history and was unrelated to a criminal investigation. Because they were not a direct byproduct of US machinery, Seagate maintained that its drives created abroad were exempt from US export control laws.

“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 … settling this matter was the best course of action,” Seagate CEO Dave Mosley said in a statement.

The government claimed in a ruling released on Wednesday that Seagate mistakenly thought the foreign product rule only required a review of the final step in the manufacturing process and not the full process.

The ruling stated that Seagate manufactured drives in China, Northern Ireland, Malaysia, Singapore, Thailand, and the United States and used equipment, including testing equipment, that was subject to the regulation.

(With inputs from agencies)

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