Boeing Pays $51 Million for ITAR Violations

Corruption Crime & Compliance

Boeing continues to struggle with its core business activities. As troubles mount for Boeing, it is clear that it continues to suffer 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 overall ethics and compliance commitment. As a result, Boeing stands at an important crossroads -- 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?

In its latest (mis)adventure, Boeing fell victim to a State Department fine for $51 million for violations of a number of export controls, including basic licensing requirements for exports to China and Russia. Boeing voluntarily disclosed the violations to the Directorate of Defense Trade Controls ("DDTC") in the State Department.

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 imposed 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. That officer will regularly report to the DDTC on Boeing’s progress.

• Boeing faced a $51 million settlement for ITAR violations, including unauthorized exports and re-transfers to foreign employees and contractors, notably in China.
• Violations involved illegal downloads of ITAR-controlled technical data from Boeing's digital repository, which affected Pentagon platforms like the F-18, F-15, and F-22 aircraft and the AH-64 Apache helicopter.
• Boeing voluntarily disclosed violations to the Directorate of Defense Trade Controls (DDTC) and the State Department, leading to the $51 million penalty, the largest for ITAR violations since 2011.
• The settlement requires Boeing to pay the DDTC $27 million, improve its compliance program with the remaining $24 million, and hire a DDTC-approved special compliance officer for three years.
• Boeing must introduce a new automated export compliance system, update the State Department on its progress every six months, and undergo two export control audits by State Department-approved consultants.
• Despite the violations occurring mostly before 2020, Boeing made significant improvements to its trade compliance program, investigated issues, cooperated with authorities, and expressed regret.
• The case highlights the State Department and DDTC's aggressive enforcement of administrative controls over military items, signaling a broader crackdown on export control and sanctions violations.

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