Washington, DC – 03/05/2014:The U.S. Department of State’s DDTC concluded an administrative settlement with Esterline Technologies Corporation of Bellevue, Washington, for its ineffective ITAR Compliance Program and alleged violations.
This settlement is to resolve alleged violations of the Arms Export Control Act (AECA) (22 U.S.C. 2778) and the International Traffic in Arms Regulations (ITAR) (22 C.F.R. Parts 120-130). Esterline agreed to enter into a consent agreement for ITAR Violations with the Department pursuant to ITAR Section 128.11. The agreement was reached following an extensive compliance review by the Department’s Office of Defense Trade Controls ITAR Compliance (DTCC) in the Bureau of Political-Military Affairs. This settlement addresses hundreds of alleged AECA and ITAR violations, and highlights the Department’s responsibility to protect U.S. defense articles, including technical data, and defense services from unauthorized use.
DTCC determined that Esterline demonstrated inadequate corporate oversight and failed to establish an adequate AECA and ITAR compliance program in its defense trade activity. Over the course of many years, Esterline and its operating divisions, subsidiaries, and business units disclosed to the Department hundreds of alleged AECA and ITAR violations consisting of unauthorized exports of defense articles, including technical data, and defense services; unauthorized temporary imports of defense articles; violations of terms and conditions of licenses or approvals granted; exports of defense articles in excess of quantity and value authorized; improper use of exemptions; and failure to file or filing of incorrect documentation with the Automated Export System.
DTCC’s compliance review concluded that many of these alleged ITAR violations occurred because Esterline did not properly establish ITAR Compliance jurisdiction over its defense articles and technical data, did not properly administer licenses and agreements, and had incomplete or poor recordkeeping. The alleged ITAR violations involved defense articles, technical data, and defense services that are or were controlled at the time of the alleged violations by the U.S. Munitions List under the following current or former categories: IV(h), VI(i), VI(f), VI(g), VII(g), VII(h), VIII(h), VIII(i), XI(a), XI(c), XI(d), XII(e), XII(f), XV(e), XV(f), XX(c), and XX(d).
Under the terms of a three year Consent Agreement with the Department, Esterline will pay a civil penalty of $20 million. The Department agreed to suspend $10 million of this amount on the condition the Department approves expenditures for self-initiated, pre-Consent Agreement remedial compliance measures and Consent Agreement-authorized remedial compliance costs. Additionally, Esterline will engage a Special Compliance Official to oversee the Consent Agreement, implement a comprehensive ITAR Compliance Program, and Esterline will conduct two audits of its ITAR Compliance Program as well as implement additional ITAR Compliance measures, such as improved policies and procedures, and additional training for employees and principals.
Esterline disclosed the alleged AECA and ITAR violations resolved under this settlement to the Department, acknowledged the serious nature of the alleged violations, cooperated with the Department, and implemented or has planned extensive remedial measures. For these reasons, the Department determined that an administrative debarment of Esterline was not appropriate at this time.
The Consent Agreement and related documents will be available for public inspection in the Public Reading Room of the U.S. Department of State and on the Directorate of Defense Trade Controls website at http://www.pmddtc.state.gov/compliance/consent_agreements.html .