U.S. BIS imposes $300 million penalty to resolve violation of foreign direct product rule

Alleged violations of U.S. export controls related to selling hard disk drives (HDDs) to a Chinese technology company

Violation of foreign direct product rule

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce has imposed a $300 million civil penalty against a U.S. technology company based in Fremont, California and its international headquarters based in Singapore to resolve alleged violations of U.S. export controls related to selling hard disk drives (HDDs) to a Chinese technology company in violation of the foreign direct product (FDP) rule.

According to the BIS release (April 19, 2023), the resolution includes a multi-year audit requirement and a five-year suspended denial order.


  • BIS in August 2020 imposed controls over certain foreign-produced items related to Huawei, as further described below.
  • The U.S. company in September 2020 announced it would continue to do business with the Chinese company, despite the fact that its only two competitors had stopped selling HDDs to the Chinese company.
  • BIS’s investigation determined that the U.S. company engaged in conduct prohibited by the Export Administration Regulations (EAR) by ordering or causing the reexport, export from abroad, or transfer (in-country) of more than 7.4 million HDDs without BIS authorization.

For more information, contact a professional with KPMG Trade & Customs services:

Doug Zuvich
Partner and Global Practice Leader
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
E: labad@kpmg.com

Irina Vaysfeld
E: ivaysfeld@kpmg.com

Amie Ahanchian
E: aahanchian@kpmg.com

Christopher Young
E: christopheryoung@kpmg.com

Gisele Belotto
E: gbelotto@kpmg.com

George Zaharatos
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
E: adoornaert@kpmg.com

Jessica Libby
E: jlibby@kpmg.com
John Anderson
Managing Director
E: johneanderson@kpmg.com
Jenna Leigh Glass
Managing Director
E: jennaleighglass@kpmg.com

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