updated 7/6/2005 6:10:24 PM ET 2005-07-06T22:10:24

The State Department has reportedly warned Boeing Co. that the aerospace titan could be fined up to $47 million because it sold commercial airliners to China and other countries without obtaining an export license for a tiny electronic chip that has defense applications.

The Seattle Times reported Wednesday it obtained a draft letter that outlines 94 alleged violations of the Arms Control Act and that asserts the government could impose fines of up to $500,000 per violation.

The sales in question took place between 2000 and 2003.

Early last year, the government conceded Boeing's right to export the technology as a civilian item rather than a military one. But the State Department alleges that between 2000 and 2003 the company showed "a blatant disregard for the authority of the department," by misrepresenting facts and making false statements on shipping documents to get around the export restrictions.

Boeing contends it ignored State Department edicts because its lawyers said the department was "without legal authority" to regulate the exports.

The case involves the export of jets that contain a gyroscopic microchip called QRS-11, used as a backup system in determining a plane's orientation in the air.

On Boeing jets, three microchips are embedded in an instrument box. Acting together, the chips provide a three-dimensional positional reading, telling the pilot through the flight display the precise yaw, roll and pitch of the airplane.

A Boeing document obtained by The Times calls the chip technology "relatively unsophisticated," but says it also has been used to help stabilize and steer guided missiles.

In the draft charging letter, the State Department's Directorate of Defense Trade Controls alleges that between 2000 and 2003 Boeing broke export control laws in shipping what was then classified as militarily significant technology to China and other countries.

The State Department claims Boeing did so deliberately and repeatedly even after it had been warned to stop.

Boeing "was aware that a (State) Department export license was required but chose to export without authorization by using false statements on documents," the charging letter says.

Boeing managers declared on shipping certificates that no export license was required, even after the State Department had told the company otherwise, the letter says.

Eventually Boeing acknowledged it had exported 96 aircraft and 27 spare gyrochip-equipped flight boxes without export licenses.

Both Boeing's defense and the government's case focus on a letter to the State Department dated August 2003, in which the company said it had reviewed the classification of the sensor and decided that the department "did not have jurisdiction." Boeing said the exports were "made in good faith based upon a well-founded legal opinion."

In November 2003, top Boeing and U.S. aviation-industry leaders petitioned then-Secretary of State Colin Powell for a resolution.

In January 2004, QRS-11 sensors were kept on the list of military items, but when integrated into commercial-jet flight boxes were reclassified as commercial, not military, items.

Export control of sensors inside commercial jets was transferred from the State Department to the Department of Commerce.

Both a State Department official involved in the case and a department spokesman declined to comment to The Times, the newspaper said.

A prepared statement from Boeing emphasized that the charges relate only to activity prior to 2004 and said the company continues "to work with the State Department towards possible resolution of this matter."

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