On May 3, 2021, the U.S. Department of State announced a $13 million penalty and settlement with Honeywell International, Inc. (Honeywell), resolving the alleged violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR).
Honeywell, which manufactures and exports ITAR-controlled defense articles in the aerospace industry, was charged with multiple alleged unauthorized exports and retransfers of ITAR-controlled technical data in the form of engineering files to several countries across three continents. The alleged violations resulted from the failure to exercise appropriate internal controls and were the subject of two voluntary disclosures submitted in 2016 and 2018. The 2016 disclosure involved unauthorized transfers of drawings to foreign suppliers to request quotes during the period between 2011 and 2015. In 2018, Honeywell disclosed similar violations, when its personnel, utilizing an alternative procedure, failed to review (or incorrectly determined) the export control jurisdictions and classifications of the materials.
The settlement's Consent Agreement imposes a $13 million civil penalty, up to $5 million of which will be suspended if Honeywell spends it on government-approved remedial compliance measures to enhance its own compliance system. The Consent Agreement also requires that Honeywell undergo one external audit of its compliance system in the next three years, implement additional compliance measures, and engage an external Special Compliance Officer to oversee the Consent Agreement implementation.
Counterbalancing the mitigating factors, Honeywell's aggravating factors played a part in the size of the penalty, including the specific destination countries, the significance of the military equipment data involved, and repeat violations.
The Honeywell Consent Agreement demonstrates that the Department of State remains vigilant in enforcing export compliance in its mission to protect U.S. national security from the effects of unauthorized exports, including technical data. It also emphasizes the importance of operating your business, particularly those in the aerospace/defense supply chain, with the benefit of a tailored export compliance program and obtaining proper authorizations before exports of controlled items.
Originally published May 12, 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.