United Technologies Corporation (UTC), its U.S. subsidiary Hamilton Sundstrand Corporation (HSC) and its Canadian subsidiary Pratt & Whitney Canada Corp. (PWC) have agreed to pay more than $75 million as part of a “global settlement” with the U.S. Departments of State and Justice to address illegal arms exports to China (in particular, illegal exports of U.S.-origin software used in the development of China’s military attack helicopter, Z-10), false and belated disclosures to the U.S. government about these illegal exports, and other outstanding export violations. Roughly $20.7 million of this sum is to be paid to the Justice Department related to three criminal charges. The remaining $55 million is payable to the State Department as part of a separate consent agreement to address 576 alleged violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). Up to $20 million of this penalty can be suspended if applied by UTC to remedial compliance measures. The UTC settlement underscores the U.S. government’s heightened vigilance over illegal exports of sensitive U.S. technology, especially to China.

I. Key Facts

Since 1989, China has effectively been subject to a U.S. arms embargo and, consequently, the State Department has denied any requests to export U.S. defense articles and/or defense services to that country. Beginning in the 1990s, China sought to develop a military attack helicopter under the guise of a civilian helicopter program in order to secure Western assistance. The Z-10, developed with assistance from Western suppliers, is China’s first modern military attack helicopter.