Honeywell Settles Allegations of Defense Export Violations

(Source: Honeywell Aerospace)

By Samuel Rubenfeld

Tuesday, May 4, 2021

Honeywell International Inc. reached a settlement with the U.S. State Department over allegations that the company shared technical data in multiple countries, including China, Taiwan, Canada, Mexico and Ireland, in violation of export regulations.

The allegations stem from the Charlotte, North Carolina-based company’s sharing of engineering prints showing technical aspects of military technology, including layouts, dimensions and geometries for manufacturing castings and finished parts for aircraft, electronics and gas turbine engines, according to a charging document posted by the State Department. 

The drawings pertained to the F-35 Joint Strike Fighter, F-22 Fighter Aircraft, the M1A1 Abrams Tank and other military products, the charging document said. There were a total of 34 charges in the matter, though there would have been additional violations had Honeywell not made a voluntary disclosure, cooperated with authorities and entered into tolling agreements, it said.

Under a 36-month consent agreement, Honeywell agreed to pay a USD 13 million civil penalty for violating the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). But USD 5 million of the amount was suspended on the condition that the funds be used for remedial measures to strengthen the company’s compliance program, the State Department said. The department declined to debar Honeywell, citing the company’s disclosures, cooperation and improvements to its compliance program. For the agreement’s first 18 months, the company will also bring on an external senior compliance officer.

“The settlement demonstrates the Department’s role in strengthening U.S. industry by protecting U.S.-origin defense articles, including technical data, from unauthorized exports. The settlement also highlights the importance of obtaining appropriate authorization from the Department for exporting controlled articles,” the State Department said in a statement.

A public response to the settlement wasn’t posted to Honeywell’s website as of this writing. However, in a statement cited by the outlet Defense News, the company said it took steps to ensure the conduct wouldn’t recur, and it disputed the U.S. government’s contention that some of the violations harmed national security. The issues involved technology “commercially available throughout the world” and “no detailed manufacturing or engineering expertise was shared,” Defense News reported the statement as saying. 

According to the charging documents, Honeywell Aerospace’s Integrated Supply Chain (ISC) organization sent a request for quotations to U.S. and foreign suppliers containing drawings for parts for which suppliers were asked to provide price estimates. Honeywell initially disclosed in December 2015 that it had identified multiple ITAR-controlled drawings that ISC personnel had shared with Taiwan and China months earlier. By March 2017, Honeywell identified a total of 71 drawings between July 2011 and October 2015 that it had exported without authorization.

Honeywell exported 51 of the 71 drawings to unaffiliated suppliers in China, a proscribed destination under ITAR, according to the charging document. The company also exported 20 of the 71 drawings to its subsidiaries in the country, and its subsidiaries in turn re-transferred 16 of those drawings to unaffiliated suppliers in China, the document said.

In a second voluntary disclosure submitted in October 2018, Honeywell described how personnel in the same organization within Honeywell had committed another series of ITAR violations, similar to the ones committed years earlier, according to the charging document. A team of ISC personnel invented what the company called “an alternative process” for soliciting price quotes that it had believed complied with export requirements, the document said. But under the alternative process, the employees failed to review export control classifications for the technical documents or use an analysis method that properly categorized the documents. 

The purpose of the so-called alternative process was to increase the efficiency and speed of a procurement project, according to the charging document. Under the alternative process, between June and July of 2018, Honeywell exported two drawings to Canada, two to China and nearly two dozen to Mexico, the document said. 

The case against Honeywell is the first brought by the U.S. State Department’s Directorate of Defense Trade Controls (DDTC) since last year’s settlement with Airbus SE, according to its enforcement page. The ITAR violations in the Airbus case were part of a USD 4 billion global corruption settlement involving bribery in more than a dozen countries. The U.K. dropped an investigation into individuals in the case, Reuters and Bloomberg News each reported Tuesday, citing sources familiar with the matter.