Boeing Settles US Export Control Probe With $51M Fine, Compliance Commitments

The State Department fined Boeing $51 million after the company allegedly violated a range of U.S. export controls, including license requirements for exports to China and Russia. The violations, which Boeing voluntarily disclosed, included illegal exports to foreign employees and contractors working in more than 15 countries; a trade compliance specialist fabricating an export license to illegally ship defense items abroad; and violations of the terms and conditions of other export licenses, among other things.

The penalty is the largest stand-alone civil fine by the Directorate of Defense Trade Controls since it fined BAE Systems $79 million in 2011. As part of a settlement agreement, Boeing must pay $27 million to the agency within two years and use the remaining $24 million to make specific improvements to its compliance programs and procedures. The company must also hire a DDTC-approved special compliance officer to oversee its compliance with the International Traffic in Arms Regulations for the next three years, and that officer will regularly report to DDTC on Boeing’s progress.

A Boeing spokesperson said the company is “committed to our trade controls obligations,” adding that many of the alleged violations “predate the significant improvements we have made to our trade controls compliance program since 2020.” The company is “committed to continuous improvement of that program, and the compliance undertakings reflected in this agreement will help us advance that objective,” the spokesperson said in a Feb. 29 email.

DDTC noted that Boeing did not admit to or deny the violations, and the agency “acknowledged” that most of them happened before 2020, after which the company “incorporated numerous improvements to its compliance program.” It also said Boeing voluntarily investigated the issues and cooperated with DDTC, which helped the aircraft manufacturer avoid a potentially “higher penalty.”

The agency pointed to several aggravating factors that contributed to the fine, including the fact that some of the alleged violations "caused harm" to U.S. national security, involved exports of “significant military equipment,” and included shipments to a “proscribed destination” in the ITAR, which are countries generally subject to a license review policy of denial. DDTC also noted some violations involved Russia, which was subject to expanded controls at the time following its invasion of Crimea in 2014.

In a 15-page charging letter, the agency said Boeing committed 199 ITAR violations that it voluntarily disclosed between 2017 and 2022. DDTC said many of those violations involved unauthorized exports and retransfers to foreign employees and contractors, including some in China. Boeing allowed employees in overseas “partner facilities” to illegally download files containing ITAR-controlled technical data from the Boeing Library System, the company’s “digital technical document repository.”

Those included exports of documents containing technical data controlled under U.S. Munitions List Categories IV(i), VIII(i), IX(e)(1), XI(d), XII(f), XIII(l), XIX(g). They also involved information relating to several Pentagon “platforms,” including the F-18, F-15 and F-22 aircraft, the AH-64 Apache helicopter, various missiles and more.

Other illegal data exports involved other Boeing facilities in Australia, Canada, France, Germany, Hong Kong, India, Italy, Japan, Kenya, Morocco, Russia, Singapore, South Korea, Spain, Taiwan, Thailand and the U.K. DDTC said Boeing allowed employees or contractors in those countries to illegally download ITAR-controlled technical data on 80 occasions from 2013 to 2018.

Boeing also disclosed similar violations involving its subsidiaries in Australia and India. DDTC said Boeing Defense Australia hired Australian contractors but “repeatedly failed” to add their “employee providers” to the company's Technical Assistance Agreements. That led to eight illegal transfers of USML Category VIII(i) and XI(d) technical data to Australian contractors between October 2019 and February 2020.

DDTC also said a trade compliance specialist working at Aviall Services, a Boeing subsidiary, “fabricated” five export licenses, which led to seven illegal exports of USML Category XIX(f)(1)-(3) nozzle segments and seal strips to Portugal and Turkey. Boeing “promptly took corrective measures” when it discovered the issue, DDTC said.

Other alleged violations stemmed from export misclassifications. Boeing told DDTC it mistakenly relied on Commerce Department licenses to ship USML Category VIII(h)(18) parts for the AH-64 Apache Helicopter flight control system to several countries between August 2018 and August 2022. It also misclassified “exhaust system items,” which it exported to Japan, Singapore, and the U.K.; certain controlled flat panel displays, which it exported to India; and certain controlled aviation helmets, which it exported to Qatar.

Other alleged violations outlined in the charging letter include illegal exports to foreign contractors in Canada and Switzerland; an illegal shipment of a remote finger printing system to India; an illegal export of night-vision goggles to Singapore; and an illegal shipment of F-15 pylons to Saudi Arabia. Boeing also allegedly violated the terms of temporary import licenses, including one In September 2021, when it imported radio equipment from Germany and Singapore into the U.S. DDTC said those imports “exceeded the approved value and quantity on two temporary import licenses.”

The charging letter also describes various alleged violations of the terms, conditions and provisos of DDTC authorizations given to Boeing, including on several occasions in 2018 and 2019, when Boeing illegally exported controlled technical data to Israel to help the Israeli government and independent contractors upgrade certain helicopters. The licenses Boeing used said “exports of technical data related to enhancements of, or upgrades to, any integrated system ARE NOT authorized,” DDTC said.

The company also violated two TAA provisos when it released controlled technical data involving a “digital data link transmission signal capability” to five pilots in the Lebanese Armed Forces. One of the provisos said U.S. government “data link capabilities ... MUST NOT be discussed, offered, or released.”

Under the settlement agreement, Boeing agreed to introduce a new automated export compliance system across its “operating divisions” and subsidiaries, and the company must update DDTC on the status of that system every six months for the three-year term of the settlement. The system will “track the decision process from the initiation to conclusion of a request” for export, the agreement said, and will also “cover the initial identification of all technical data and technical assistance in any form proposed to be disclosed to any foreign persons.”

Boeing also agreed to put in place a range of other “strengthened” compliance policies, procedures and training, and must improve its ITAR compliance program within six months to reflect better procedures for reporting possible violations and classifying export-controlled items. DDTC said the company must also conduct a review of its various item classifications within six months to verify their “export control jurisdiction.”

The company also agreed to on-site visits from DDTC officials and must complete two export control audits by DDTC-approved outside consultants. The first audit will offer recommendations for Boeing to improve its compliance programs, and the second audit will “confirm” whether Boeing addressed those recommendations. Boeing will give the results of both audits to DDTC.

DDTC said it decided not to debar Boeing -- which would have prohibited the company from participating in ITAR exports and activities -- because the company cooperated with the agency’s investigation, “expressed regret” and took steps to improve its compliance programs. The agency said it “reserves the right” to debar Boeing if it violates the settlement agreement.