China: November 1, 1999


Boeing has been indicted for export violations in the early 90s by McDonnell Douglas, which it absorbed a few years after the deal. McDonnell Douglas had a deal to build 40 airliners in China and shipped considerable quantities of tools there for that purpose. Later, the deal was scaled back to only 20 planes, and the Chinese took the surplus tooling to a factory which produced military aircraft and missiles. The problem was that the export licenses for the tools were only good for civilian aircraft factories, not military ones. Intelligence analysts note that the Chinese military could have gained some value from copying tools in the hands of their own civilian factories. Later, the tools were moved to a civilian aircraft factory approved by the US government. The Justice Department alleges that McDonnell Douglas knew about and colluded in the unauthorized movement of the tools because it didn't want to lose the $3 million that China would have refused to pay for them after the airliner deal was cut in half. Boeing insists that McDonnell-Douglas was unaware of the transfer and that it is not responsible for the technical violation. Boeing lawyers hint that their defense will include an attack on the lack of leadership in export controls shown by the Clinton Administration, and that they will demonstrate that not only were the export restrictions vague and not enforced, but that there was an active attitude of selling anything the Chinese wanted to buy. Legal analysts note that the case against Boeing is weaker than the upcoming cases against Hughes and Loral, but that Boeing has more to lose. It could be banned from exporting anything made in a previous McDonnell Douglas plant or based on technology from that company, costing the company billions of dollars. Angry officials at the US Customs Service have said that companies which trade American security for profits are about to learn that there is a heavy price to be paid. --Stephen V Cole




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