The effect of the embargo was to prevent US company supplying components to Huawei wherever it was operating. This newspaper remembers the furore when the first embargoes were announced and it was a big deal in national and international media. Seagate's main competitors, Western Digital and Toshiba ceased sales to Huawei immediately the final rule was published.

So, it is surprising that, between August 2020 and September 2021 Seagate Technology Holdings PLC sold hard discs to Huawei. The total sale value was for 7.4 million drives worth more than USD1,100 million.

Seagate's defence is surprising: it claimed that it was of the opinion that drives made outside the USA were not subject to the embargo. Given that Ford suffered a large penalty because Land Rover, then a subsidiary of Ford which built all its vehicles in the UK, the question is how Seagate didn't know, or was not advised that the argument would not succeed. The Ford case is far from the only case where BIS has taken action in relation to foreign-produced product.

“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.

But there was one potential saving: Seagate made drives in China, Northern Ireland, Malaysia, Singapore, Thailand, and the United States, the order said, and used equipment, including testing equipment, subject to the rule. What if the drives to which the Order related were manufactured in China and not "exported" in the accepted sense of the word.

BIS says that's irrelevant: "Any company exporting to an entity subject to the additional FDP rule restrictions needs to evaluate its entire manufacturing process to determine if specified U.S. technologies or software were used in building the essential tools used in production. Companies that discover violations should submit voluntary self-disclosures to The Office of Export Enforcement.”

BIS has imposed a penalty of USD300 million against Seagate Technology LLC of Fremont, California (Seagate US) and Seagate Singapore International Headquarters Pte. Ltd., of Singapore (Seagate Singapore). The penalty is more than twice what BIS estimates was the profit on the sale.

A further complication was that Huawei was unable to make payment and so Seagate in the US lent it the money. "In March 2021, Seagate and Huawei even entered into a Long-Term Agreement involving a purchase agreement of over 5 million HDDs and naming Seagate a “key strategic supplier,” BIS says.

The penalty will be paid in instalments of USD15 million per quarter. It'll take five years. It will also be subjected to three audits of its compliance policies and procedures and has a five year suspended order which, if brought into effect, would deny it a wide range of export privileges.

Further reading:
The Federal Register: https://www.federalregister.gov/documents/2020/08/20/2020-18213/additio…

BIS Order: https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-re…