The China Nuclear Industry Huaxing Construction Co., a corporate entity owned, operated and by the People’s Republic of China (PRC), pled guilty to charges it conspired to violate the International Emergency Economic Powers Act (IEEPA) and the Export Administration Regulations (EAR).
Federal officials said the plea marks the first time that a PRC corporate entity has entered a plea of guilty in a U.S. criminal export matter.
“In 2010, the Chinese subsidiary of PPG Industries pled guilty to the conspiracy to export high-performance coatings for use in the Pakistani nuclear reactor,” said U.S. Attorney Ronald Machen. “In 2011, the former managing director of that subsidiary, a Chinese national, pled guilty. Now, Huaxing — the PRC-corporate entity that bought the coatings for application in the Pakistani reactor — has accepted responsibility for its role in the crime. The lesson here is clear: we will pursue violations of U.S. export controls wherever they occur in the world, we will prosecute both individuals and corporate wrong-doers, and a corporation’s status as foreign-owned, or even state-owned, will not bar enforcement of those laws in U.S. courts.”
The case’s combined $3 million in criminal and administrative fines represent the government’s continued determination to pursue substantial monetary penalties for export violations.
Huaxing is headquartered in Nanjing, China.
Its guilty plea is the result of a long-term investigation of illegal exports of high-performance epoxy coatings from the United States to the Chashma II Nuclear Power Plant in Pakistan, which Huaxing was building as part of a nuclear cooperation pact between the PRC and Pakistan.
Chashma II is owned by the Pakistan Atomic Energy Commission (PAEC), an entity on the Department of Commerce’s Entity List.
The investigation was led by the Department of Commerce’s Bureau of Industry and Security (BIS).
Huaxing agreed to the maximum criminal fine of $2 million, $1 million of which will be stayed pending its successful completion of five years of corporate probation.
The terms of Huaxing’s probation will require it to implement an export compliance and training program that recognizes Huaxing’s obligation to comply with U.S. export laws.
Through an administrative agreement with the Department of Commerce, Huaxing has also agreed to pay another $1 million immediately and be subject to multiple third-party audits over the next five years to ensure the efficacy of its compliance with U.S. export laws.
Huaxing’s guilty plea is related to the December 2010 guilty plea of PPG Paints Trading (Shanghai) Co. Ltd. (PPG Paints Trading), a Chinese subsidiary of Pittsburgh-based PPG Industries, to a four-count information in the U.S. District Court for the District of Columbia.
PPG Paints Trading and its parent company, PPG Industries, paid $3.75 million in criminal and administrative fines and more than $32,000 in restitution.
In November 2011, Xun Wang, the highest ranking executive at the Chinese PPG subsidiary, pleaded guilty to conspiracy and agreed to cooperate with the government’s investigation.