The U.S. State Department is investigating how aircraft engines made near Montreal ended up in attack helicopters in China.

The maker, Pratt and Whitney Canada, says it did nothing illegal. It delivered 10 engines to Bejing in 2001 and 2002 on condition they be used only in civilian aircraft. The Liberal government of the day approved the deal, a decision the present Conservative government is supporting.

But Washington is not happy. If the engines contain U.S. technology or parts, the company could be hit with big fines for violating U.S. export laws.

It has been confirmed that the Chinese military put the Canadian engines in Z-10 attack helicopters, which can carry up to 16 anti-tank missiles.

An American military analyst, Richard Fisher, said it should come as no surprise that China ignored the conditions of the sale.

"Somebody is asleep," he told CBC News. "I would suggest the Canadian government was not defending the interests of the Canadian people. The Z-10 is just one major military program amongst hundreds that China is pursuing in order to prepare for a possible war against Taiwan."

Fisher is a vice-president of a Washington think-tank, the International Assessment and Strategy Center, and a specialist in Chinese military affairs. He said the Z-10 could also end up in Sudan or Burma, also known as Myanmar.

Canada's trade minister, David Emerson, sees no reason to get upset.

"There are no more engines being exported," he said. "I'm not sure what the U.S. is doing or not doing, but as far as we're concerned, the case is really closed."

But a U.S. State Department official calls the situation serious. Under U.S. arms trafficking laws, Washington must give its approval for U.S. products and technology to be used for military purposes in a third country.

Pratt & Whitney Canada — a unit of Connecticut-based United Technologies, a big U.S. defence contractor — isn't talking about possible American content in the engines.