"Even after the enforcement action, company leadership remains undeterred in this assessment."
This is because the red flags were clear for Seagate to know it was venturing into questionable territory:
- Two of its primary competitors ceased doing business with Huawei at the time the restrictions were announced, the BIS noted. Seagate instead agreed to a three-year strategic cooperation agreement with the telecom in March 2021.
- Multiple investment firms and financial researchers noted the increased sales in their 2021 analysis and questioned the activity. “‘[Seagate’s] legal team likely interpreted U.S. restrictions differently than its peers,’” said Wedbush Securities in March 2021, as cited in the Senate report.
- Seagate itself disclosed in an August 2021 regulatory filing it could not “ensure that our interpretation of relevant restrictions and regulations will be accepted in all cases by relevant regulatory and enforcement authorities” when discussing export controls and business in China.
The result is another lesson for companies in risk assessment—and a new cautionary tale for export compliance officers to tell.