published in the Institute for Defence Studies and Analyses, as IDSA Comment, November 29, 2011, available at http://www.idsa.in/idsacomments/ThesupplyofrestricteditemstoChashmaviaChina_avishwanathan_291111
On November 15, 2011, Xun Wang, a former Managing Director of the Shanghai-based PPG Paints Trading Co. Ltd. (fully-owned subsidiary of the American PPG Industries based in Pennsylvania)
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| Pakistan's stamp depicting the Chasma Nuclear Power Plant |
Ms. Wang was arrested on June 16, 2011 at the Atlanta airport and made her first appearance before the US District Court in Washington DC on July 7, 2011. While pleading guilty on November 15, Ms. Wang has reportedly reached a $200,000 settlement with the Department of Commerce and agreed to cooperate with investigators. Ms. Wang’s arrest and guilty plea is intrinsically linked to the December 21, 2010 guilty plea made by PPG Paints Trading, Shanghai, to one count of conspiracy and three counts of acting with knowledge of a violation under various sections of the EAR and the IEEPA. PPG Industries Inc which is based in Pennsylvania and its fully owned Chinese subsidiary PPG Paints Trading which is based in Shanghai, paid a total sum of US $ 3.75 million in criminal and administrative fines and over US $ 32,000 in restitution. The amount of these fines represents one of the largest penalties imposed in the history of the Bureau of Industry and Security, US Department of Commerce for export violations.
Background
The current proceedings against Ms. Wang trace their origins to the January 2006 agreement signed between the PPG Paints Trading and the Chinese government-owned company China Nuclear Engineering Huaxing Construction Co. Ltd. to supply material to the Chinese companies working at the Chashma nuclear power plant in Pakistan. Huaxing Construction had been sub-contracted by the Chinese government owned Zhongyuan Engineering Corporation which is one of the Chinese companies involved in the construction of the Chashma Nuclear Power Plant.
However, a licence from the US Department of Commerce to export the item was necessary. This was due to two reasons. Firstly, epoxy paint and thinner was designated as EAR 99. This meant that it was not on the US Department of Commerce Control List but, was subject to regulations. Secondly, the Chashma reactor - where the item was to be used - is owned and operated by the Pakistani Atomic Energy Commission (PAEC) which is an entity on the Department of Commerce Entity list. Therefore, PPG Industries or any other organisation would require a licence from the Department of Commerce’s Bureau of Industry and Security (BIS) to export any material destined to be used at Chashma.
Following the inking of the above mentioned agreement, PPG Industries submitted an application to the US Department of Commerce for a license to export the epoxy paint coatings to Chashma in January 2006. Given that the PAEC was on the Entity List, the license was denied by the BIS. Subsequently, PPG Paints Trading, Shanghai and Ms. Xun Wang (who had joined PPG Paints Trading in May 2006) were informed of this development by PPG Industries.
It is interesting to note that prior to the January 2006 agreement with the PPG Industries, the Huaxing Construction had unilaterally applied for an export license to export the epoxy paint to Chashma on five separate occasions previously. Each time its application had been rejected. The rejection of the PPG Industries application thus constituted its sixth attempt at procuring a license – either directly or indirectly – to export the paint to be used at the Chashma nuclear power plant.