The Federal Aviation Administration has formally rejected Boeing's proposal that it not modify nor move wiring bundles in 737 Max airplanes, according to people familiar with the decision. Boeing says the bundles do not pose a potential safety threat. Nevertheless, the FAA has told the company the bundles are "not compliant."

"The FAA continues to engage with Boeing as the company works to address a recently discovered wiring issue with the 737 Max," said a spokesman for the agency. "The manufacturer must demonstrate compliance with all certification standards. The aircraft will be cleared for return to passenger service only after the FAA is satisfied that all safety-related issues are addressed."

A spokesperson for Boeing told CNBC: "We remain in ongoing discussions with the FAA on the wire bundles. Regardless of the final determination on this matter our estimate for a mid year return to service of the MAX is unchanged."

Boeing has long contended the bundles have not created any safety issues and the same placement of the wiring in previous generations of the 737 has resulted in no issues after more than 200 million hours of flight. Still, technical staff with the FAA and the European Union Aviation Safety Agency have raised questions about the potential for the wiring bundles to short-circuit.

The concern is a short circuit in particular wiring bundles in the Max could, in certain situations, lead to pilots losing control of the plane.