Jeffrey LewisBOING! State Department May Hit Boeing for 47 LARGE

Dominic Gates at the Seattle Times obtained a draft letter from the State Department to Boeing, notifying the company that Foggy Bottom “has prepared civil charges against Boeing alleging 94 violations of the Arms Control Act because the company sold commercial airliners without obtaining an export license for a tiny gyrochip that has defense applications.”

The violations could carry a fine of $47 million.

Boeing uses the QRS-11 navigational chip in aircraft and spare parts. AP explains:

On Boeing jets, three microchips are embedded in an instrument box. Acting together, the chips provide a three-dimensional positional reading, telling the pilot through the flight display the precise yaw, roll and pitch of the airplane.

The QRS-11 brochure advertises the chip as “fully qualified and used on numerous advanced aircraft, missile, and space systems.”

As I read the Seattle Times and AP articles, the issue is not the chip per se (the Feds conceded Boeing’s right to export the technology as a civilian item) but rather Boeings alleged “blatant disregard for the authority of the Department” of State. AP explains:

Boeing “was aware that a (State) Department export license was required but chose to export without authorization by using false statements on documents,’’ the charging letter says.

Boeing managers declared on shipping certificates that no export license was required, even after the State Department had told the company otherwise, the letter says.

Eventually Boeing acknowledged it had exported 96 aircraft and 27 spare gyrochip-equipped flight boxes without export licenses.

Both Boeing’s defense and the government’s case focus on a letter to the State Department dated August 2003, in which the company said it had reviewed the classification of the sensor and decided that the department “did not have jurisdiction.’’ Boeing said the exports were “made in good faith based upon a well-founded legal opinion.’‘

Gates gets the big question just right:

In pursuing Boeing over exports of 96 jets to China and other countries between 2000 and 2003, the government is resurrecting a thorny and highly politicized issue: How should the U.S. protect dual-use technology that has both military and commercial applications without damaging its increasingly globalized trade?

I told you the Bush Administration was serious about blocking technology exports to China.


  1. Dan (History)

    I don’t know that it reflects on the seriousness of the Bush administration, but the possibility of a fine of 47m deferred over 2 years (plus whatever it takes to litigate this, if necessary) is, I’m afraid, chump change for Boeing. I’m having trouble pasting Boeing’s most recent quarterly financial statement here, but with net earnings of 535m in Q1 2005, (see <a href=""SEC filing, 3.05b cash on hand (end of FY04) and a new CEO whose pay package is worth about 53m.

    I think it’s safe to say that Boeing isn’t even going to feel this. Further, the fact that they’ve got an opinion gives me pause. Lawyers don’t use that word the way normal people do; reputable firms don’t often opine unless they’re pretty confident; Boeing is apparently represented by Kaye Scholer, a firm with too much to lose to issue frivolous opinions.

  2. Scott Gearity (History)

    The real punishment for Boeing would be if they were banned from government contracts or had their export privileges suspended. How likely do you think either of those are?

    With the US military is so heavily dependent on a highly-concentrated defense industry, giants like Boeing are simply too big to fail, which in practicality means no serious contract or export bans.