Samsung's US distribution arm will pay $2.3m to settle claims it "knowingly providing inaccurate information" about the origin of some its equipment, resulting in the US government buying unauthorised Chinese-made electronics.
The settlement, announced on Tuesday by the Department of Justice, puts to rest allegations that Samsung breached federal contracting laws by telling its resellers that some of its products complied with the US trade agreements act when they did not.
Under federal rules, government agencies are generally only allowed to purchase goods made in the US or from countries covered by a trade agreement. And while that leaves the door open to goods manufactured in most countries, China, notably, is not one of them.
Samsung sells some of its equipment to the US government through authorised resellers, which need to comply with government procurement rules — namely the US trade agreement act. Samsung for its part certifies to its resellers that it's providing compliant products.
However, US authorities accused Samsung of erroneously telling resellers between 2005 and 2013 that some items were made in approved countries, generally in South Korea and Mexico, when in fact they were made in China.
"This settlement upholds important trade priorities by ensuring that the United States only uses its buying power to purchase from countries that trade fairly with us," said assistant attorney general Stuart F Delery for the Justice Department's Civil Division.
The allegations against Samsung stemmed from a suit filed by a former Samsung employee under whistleblower provisions in the False Claims Act. The act allows whistleblowers to sue for false claims on behalf of the US and to share in its recovery.
While the fine amounts to a small fraction of Samsung's revenues, the case marks the latest turn in mutual suspicions held by US and China towards each other — particularly when it comes to technology.
Following leaked documents from Edward Snowden about US surveillance and networking vendor Huawei being targeted, the Chinese government has made several moves to wall off government contracts from US technology firms.