On April 27, 2021, the Directorate of Defense Trade Control (DDTC) released the contents of the latest Consent Agreement imposed on Honeywell International, Inc., who agreed to the settlement of the civil penalty of $13M for thirty-four (34) violations of the International Traffic in Arms Regulations specific to the unauthorized export or retransfer of technical data related to USML Categories VIII(i), XI(d) and XIX(g).
Information contained in the Charging Letter indicates DDTC looked back on two previously submitted Voluntary Disclosures that covered the period of July 2011 to October 2015 and June to July of 2018 and determined that Honeywell did not have sufficient internal controls established to prevent the subsequent violations from occurring. The following are a synopsis of the violations:
- Seventeen (17) Unauthorized Exports of Technical Data to the Peoples Republic China (“PRC”) for parts and components controlled under USML Categories VIII(i), XI(d), and XIX(g).
- Nine (9) Unauthorized Retransfers of Technical Data to the PRC for parts and components controlled under USML Categories VIII(i), XI(d), and XIX(g).
- Four (4) Unauthorized Exports of Technical Data to Taiwan for aircraft parts and components controlled under USML Categories VIII(i) and XIX(g).
- Two (2) Unauthorized Exports of Technical Data to Canada for aircraft parts and components controlled under USML Categories VIII(i) and XIX(g).
- One (1) Unauthorized Export of Technical Data to Ireland for aircraft parts and components controlled under USML Categories VIII(i) and XIX(g).
- One (1) Unauthorized Export of Technical Data to Mexico for aircraft parts and components controlled under USML Categories VIII(i) and XIX(g).
Conditions of the Consent Agreement include the following:
- The Consent Agreement is in effect for three (3) years.
- Honeywell must maintain agreed upon Remedial Measures to ensure no further exports, reexports, retransfers, temporary imports or brokering activities occur where ITAR export-controlled technical data is involved.
- All remedial measures will be incorporated into any future Honeywell acquisitions that are involved with ITAR-controlled activities.
- Honeywell must advise DDTC of any sale of business units or subsidiaries that are involved in ITAR-related activities; or is a party to a corporate merger or restructuring or is acquired by another party within 60 days of the event.
- Honeywell must maintain effective control and oversight for its infrastructure, resources, policies, and procedures for its AECA and ITAR-regulated activities.
- Honeywell must ensure adequate resources are dedicated to ITAR compliance throughout its ITAR-regulated operating divisions, subsidiaries, and business units.
- Honeywell must establish policies and procedures for all of its employees with responsibility for Arms Export Control Act and ITAR compliance to address lines of authority, staffing levels, performance evaluations, and career paths.
- Honeywell, within 90 days of the Order, must conduct an internal review of AECA and ITAR compliance resources and establish the necessary actions to ensure that sufficient resources are dedicated to compliance.
- Honeywell must appoint a qualified individual to serve as a Special Compliance Officer (SCO)] or Internal Special Compliance Officer (ISCO) for the entire term that the Consent Agreement is in force. A decision for the appointment of the SCO and/or ISO will be in consultation with and approval by the Director of DDTC.
- Within ten (10) months of the Order, Honeywell will have instituted strengthened corporate compliance procedures focused principally on business operations that:
- all employees engaged in ITAR-regulated activities are familiar with the AECA and the ITAR, and their own and understand their responsibilities;
- all persons responsible for supervising those employees, including senior managers of those units, are knowledgeable about the underlying policies and principles of the AECA and the ITAR; and
- there are records indicating the names of employees, trainers, level and area of training received.
- Honeywell agrees to implement a comprehensive automated export compliance system throughout its operating divisions, subsidiaries, and business units engaged in ITAR-regulated activities to strengthen company’s internal controls for ensuring compliance with the AECA and the ITAR.
- Honeywell agrees to conduct at least one (1) audit, which will be conducted by an outside consultant with expertise in AECA/ITAR matters and approved by DDTC.
- Honeywell agreed to the assessment of the $13M penalty; of which $8M will be paid to DDTC and the remaining $5M must be used to cover the costs of the stated remedial compliance measures.
Bottom line for all organizations big or small, is: where you may have affiliates or subsidiaries, you must understand how RFQ/RFPs are being handled and where any export-controlled information may be disseminated. Conducting regular discussions with Trade Compliance to determine whether an export authorization is required will save you a lot of heartache (and money).
If you need assistance in reviewing your export compliance program, please contact Export Solutions for a free consultation.
Beverly Demma is a Sr. Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.