Boeing continues to struggle. As troubles mount for Boeing, it is clear that it suffers from real and pervasive culture issues that have been reflected in serious safety failures, financial difficulties, regulatory violations and serious reputational damage. Boeing’s troubles permeate every part of its organization — from the board to senior executives, to its operations and its overall ethics and compliance commitment. As a result Boeing stands at an important crossroad — will it make a real commitment to change, reform and ethics and compliance, or will it continue to limp along suffering repeated incidents of harm?
The violations of the International Traffic in Arms Regulations (“ITAR”) included illegal exports to foreign employees and contractors who work 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 DDTC’s $51 million penalty is the largest administrative penalty impose for ITAR violations since it imposed a $79 million penalty against BAE Systems in 2011. Under the terms of the settlement, Boeing must pay $27 million to the DDTC within two years and use the remaining $24 million to improve its compliance program and procedures. In addition, Boeing is required to hire a DDTC-approved special compliance officer to oversee its compliance with ITAR for the next three years, and that officer will regularly report to the DDTC on Boeing’s progress.
DDTC noted that most of Boeing’s violations occurred before 2020, after which the company made numerous improvements to its trade compliance program. Boeing voluntarily investigated the issues and cooperated with the DDTC.
In reaching the settlement, the DDTC cited 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.
The DDTC issued a 15-page charging letter which cited Boeing for committing 199 ITAR violations between 2017 and 2022. Many of the 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….
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