The department accused Hughes Electronics Corp. and Boeing Satellite Systems of illegally giving technical data to China following failed Chinese launches of rockets carrying American satellites in 1995 and 1996. Boeing acquired Hughes' space unit in 2000.
In a letter dated Dec. 26, the State Department said the companies committed 123 violations of the Arms Control Export Act and the International Traffic in Arms Regulations.
If the violations are upheld through the department's administrative appeals procedures, the companies could face restrictions on selling technologies overseas. They also could face fines of $500,000 per charge, though it is not clear if each violation would constitute a separate violation.
"The number and substance of charges reflect the seriousness of the violations," Lou Fintor, a State Department spokesman, said Wednesday. "There are many similarities between a space launch vehicle and an intercontinental ballistic missile."
A Hughes spokesman, Richard Dore, said the company did nothing wrong.
"We did not do anything to assist the Chinese," he said.
Dore said the company complied with the regulations of the Commerce Department, which oversaw technology exports at the time. He said discussions with the State Department are continuing.
Dore also noted that a Justice Department investigation of the two companies and a third, Loral Space & Communications Ltd., did not result in any criminal charges.
Boeing spokesman Walt Rice said the company needs to review the State Department's accusations before commenting.
Loral reached a civil settlement with the State Department in January, agreeing to pay a $20 million fine, of which $6 million would be used to create procedures to ensure it wouldn't violate export rules in the future.
Loral has said that an employee mistakenly sent a report on the 1996 rocket failure to the Chinese.
Fintor said that "unlike Loral, Hughes and Boeing have both failed to recognize the seriousness of the violations and have been unprepared to take steps to resolve the matter."
U.S. companies began using Chinese rockets in the 1980s to launch satellites because of a shortage of U.S. rockets. After several failed launches, insurance companies underwriting them questioned the reliability of the Chinese rockets. Hughes and Loral participated in studies examining possible causes of the failures.
Congressional investigations in the 1990s found that China had gained valuable information on missiles from those reviews.