The press release can be found here. The first indictment can be found here. The second indictment can be found here. Notably. The use of OTC traders was highlighted in the UN Security Council’s March 4, 2021, Report of the Panel of Experts as a popular money laundering mechanism. The UN report also highlights China as a preferred OTC recruitment destination. Transactions involving OTC traders, especially those from China, should be closely scrutinized.
China
BIS Imposes $300 Million Penalty Against Seagate Technology LLC Related to Shipments to Huawei (BIS Action) Those involved. Seagate Technology LLC, an American data storage company, and Seagate Singapore International Headquarters Pte. LLC, a Seagate subsidiary.
Charges with penalties. 429 violations of the EAR ($300 million in administrative penalties).
What happened? On April 19, Seagate agreed to resolve 429 alleged EAR violations involving the export of hard disk drives (HDDs) to Huawei Technologies Co. Ltd. after the Commerce Department added Huawei to the Entity List. Parties listed on the Entity List are subject to strict licensing requirements when engaging in exports, shipments, and other transfers of items subject to the EAR. Between August 2020 and September 2021, Seagate allegedly caused the re-export, export from abroad, or transfer of roughly 7,420,496 HDDs, at a value of over $1 billion, to Huawei entities on the Entity List. The company took the position that its HDDs were not subject to the EAR because the drives were neither a direct product of U.S. technology or software nor made from a plant that is itself a direct product of U.S. technology or software. BIS disagreed and asserted that the HDDs were subject to the EAR as Seagate manufactured the HDDs using a fully automated laser-based surface inspection system subject to the EAR. In addition, the manufacturing technology and system were deemed “essential” and thus fell within the scope of the foreign direct product rule. As a result, Seagate was prohibited from exporting the HDDs to Huawei without a license. Seagate’s violations resulted in a $300 million penalty – the largest administrative action in BIS history. The BIS press release can be found here. The BIS Order, Settlement Agreement, and Proposed Charging Letter are available here. Notably. The foreign direct product rule can be difficult to interpret, but failing to accurately apply the new regulations to your business processes can result in large fines, as well as reputational repercussions. A careful review of all applicable rules is crucial to mitigating liability.
Pakistan
West Virginia Man Pleads Guilty to Export Fraud Violation (DOJ Action)
Those involved. Rana Zeeshan Tanveer, a U.S. citizen.
Charges with penalties. One Count of Submitting False or Misleading Electronic Export Information (EEI) (maximum of five years in prison).
7 International Trade Enforcement Roundup |
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