Exclusive: U.S. investigating Honeywell over export, import controls

Sun Jan 12, 2014 8:13am EST
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By Andrea Shalal-Esa

WASHINGTON (Reuters) - The U.S. Justice Department is investigating export and import procedures at Honeywell International Inc after the firm included Chinese parts in equipment it built for the F-35 fighter jet, three sources familiar with the matter said.

Reuters last week reported that the Pentagon twice waived laws banning Chinese-built components in U.S. weapons in 2012 and 2013 for parts supplied by Honeywell for the $392 billion Lockheed Martin Corp F-35 program.

New details have now emerged about one of those waivers, which involved simple thermal sensors that Honeywell initially produced in Scotland before moving that production line to China in 2009 and 2010. The other waivers involved high-performance magnets built in China and elsewhere.

Federal agents from the Defense Criminal Investigative Service, a law enforcement arm of the Pentagon, are working with prosecutors on the case, a person briefed on the matter said. The DCIS and the Pentagon declined to comment.

The precise nature of the investigation could not be confirmed. Typically, however, DCIS export investigations focus on whether a company violated the Arms Control Export Act by sending overseas products or technical specifications for items on the U.S. Munitions List without first obtaining a U.S. government license. The sensors and F-35 specifications in this case may be subject to the U.S. Munitions List. In terms of import violations, DCIS often investigates whether companies have engaged in fraud by misleading the Pentagon as to the origin of foreign parts.

The case throws a spotlight on the reliance of American companies, even in sensitive areas, on China as a manufacturing base for basic components. In the past 20 years, much production has been shifted out of the United States to lower cost areas, particularly China.

The sensors are part of the power thermal management system that Honeywell builds to cool the F-35, start its engines and pressurize the cabin, said Joe DellaVedova, spokesman for the Pentagon's F-35 program office.

Honeywell spokesman Scott Sayres said the company decided in late 2012 - after consulting with Lockheed and the Pentagon - to move production of the sensors used on the F-35 from China to a plant in Boyne City, Michigan. It funded the move at its own cost, he said.   Continued...

A view of the corporate sign outside the Honeywell International Automation and Control Solutions manufacturing plant in Golden Valley, Minnesota, January 28, 2010. REUTERS/ Eric Miller