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BOEING COULD FACE CHARGES OVER CHINESE TECHNOLOGY SALES

06 July 05. The FT reported that Boeing, the US aircraft maker, could face civil charges alleging that it violated US restrictions on the sale of military technologies to China.

A US State department spokesman said the government was in negotiations with Boeing over potential violations of US export control rules relating to the sales of civilian aircraft to China between 2000 and 2003. At issue is the sale of a coin-sized guidance chip, known as the QRS-11, which was embedded in the flight systems of commercial planes sold to China by Boeing.

The chip, made by a California company, is part of a popular commercial navigation system made by Thales of France and used not only by Boeing but by Airbus, Bombardier and other aircraft makers. The chip has also been used in missile guidance systems, however, and as such has been classified by the US government as a “munitions” item that cannot normally be sold to China.

The Seattle Times, which first reported the story on Wednesday, said a State department draft of possible charges against Boeing alleges the company committed 94 violations of export control laws by shipping aircraft containing the chip without first obtaining an export licence from the US government. The US alleges the company knew it was violating the law when it made the sales, and did so repeatedly after it had been told by the government to stop. The developments come as Boeing is trying to shake off a series of government procurement-related scandals. The company could face fines of as much as $47m under the charges

Boeing would not comment on the issue, saying it was continuing to work with the State department on a resolution. The charges could also raise new questions over the application of US export controls, which many companies say needlessly prohibit commercial sales to countries like China. When the issue of the QRS-11 sales first arose in 2003, the State department waived the law to allow two Boeing jet sales to China to proceed. The US government further agreed in January 2004 to permit future commercial sales as long as the chip was embedded in a navigation system. Airbus, however, says it was forced to delay several sales while it sought export licenses, and to remove the QRS-11 chip from aircraft it had already sold.

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