US Tech Company Says BIS Accused It of Violating Export Controls

The Bureau of Industry and Security recently sent a proposed charging letter to Seagate Technology alleging that it violated U.S. export controls by providing controlled items to a company on the Entity List. Seagate said the Aug. 29 letter accused it of violating the Export Administration Regulations by providing hard disk drives to the blacklisted company and its affiliates between August 2020 and September 2021.

Seagate told BIS that it didn’t violate U.S. export controls because the hard disks aren’t subject to the EAR, the company said in an Oct. 26 SEC filing. “Seagate believes it has complied with all relevant export control laws and regulations,” the company said. BIS’s proposed charging letter accuses Seagate of selling the hard disk drives to Huawei, Reuters reported.

A Commerce Department spokesperson declined to say whether the agency sent the letter. BIS recently revised its administrative enforcement policies to publish all charging letters (see 2206300069), and the spokesperson said the agency plans to continue to make charges public “with the filing of a charging letter or the issuance of an order resolving the matter.”

“BIS is committed to fully investigating any allegation of violations of the Foreign Direct Product Rule, including any attempts to sell or divert export-controlled items to entities on the Entity List,” the spokesperson said Oct. 26. “BIS aggressively pursues criminal and civil actions related to unauthorized exports to China.”

Republican staff on the Senate Commerce Committee told BIS last year that Seagate had likely violated U.S. export controls against Huawei for more than a year by shipping hard disk drives to Huawei in violation of BIS’s foreign direct product rule (see 2110260040, 2005150058 and 2008170029). Seagate told the committee’s minority staff that the products didn’t need a license, but the staff disagreed, saying the company incorporated controlled semiconductor items into the hard disk drives with knowledge that the products were destined to Huawei.

Sen. Roger Wicker, R-Miss., whose staff published a report on Seagate’s potential export control violations, said he is "pleased" BIS "finally seems to be acting a full year after" the report was released. "China is our greatest strategic competitor," Wicker said in an Oct. 26 emailed statement. "It is more important than ever that we enforce strict export controls over sensitive products to prevent our adversaries from using them."

BIS at the time also declined to say whether it was investigating Seagate and faced criticism for not moving quickly enough to penalize the company. Republicans urged BIS to move faster (see 2111160015), while a Chinese technology expert said in June that the agency’s “inaction” has emboldened other companies to export similar shipments (see 2206070011 and 2206080011)

In its SEC filing, Seagate said it has “committed to compliance,” employs a “global team of international trade compliance and legal professionals" and uses “robust trade controls” and procedures. But the company also said the matters raised by BIS in its proposed charging letters “remain unresolved,” adding it’s “possible” the “outcome could have a material impact on our business” and revenue. “Seagate has been cooperating with BIS and intends to continue to engage with BIS to seek a resolution of this matter,” the company said.