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Chinese Firm Admits Paint Smuggling

Thursday, December 6, 2012

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A construction company controlled by the Chinese government has pleaded guilty to illegally exporting U.S.-made coatings to Pakistan for use on a nuclear reactor, the U.S. Justice Department has announced.

The plea and a $3 million fine assessed against China Nuclear Industry Huaxing Construction mark the first time that a Chinese company has admitted guilt in a U.S. criminal export case, the government said.

The department said the plea followed a long-term investigation of illegal exports of high-performance epoxy coatings from the U.S. to the Chashma II Nuclear Power Plant in Pakistan, which Huaxing was building as part of a nuclear-cooperation pact between China and Pakistan.

Chashma II Nuclear Plant

China is helping Pakistan build the Chashma Nuclear Power Complex. The Chashma II reactor, cited in the coatings case, went online in May 2011.

In the settlement, Huaxing agreed to the maximum criminal fine of $2 million and to pay an additional $1 million immediately. The company must also implement an export compliance and training program that recognizes its obligation to comply with U.S. export laws and be subject to multiple third-party audits over the next five years.

Pakistan Restrictions

The plant is owned by the Pakistan Atomic Energy Commission. Nanjing-based Huaxing admitted to charges that it conspired to ship the epoxy coating through China to Pakistan's Chashma II Nuclear Power Plant in 2006 and 2007, violations of the International Emergency Economic Powers Act and the Export Administration Regulations.

The U.S. has restricted nuclear-related exports to Pakistan since the country's detonation of a nuclear device in 1998.

PPG Implications

The same investigation led to revelations that a former managing director of PPG Industries’ Chinese subsidiary had conspiring to ship the protective coatings to Pakistan.

Chashma II Nuclear Power Complex

Two reactors have opened at the complex, four are under construction, and five more are planned.

Dr. Xun Wang, 51, former managing director of PPG Paints Trading Co. of Shanghai (SPT), pleaded guilty in federal court in November 2011 and agreed to cooperate with the investigation.

In December 2010, PPG and its Chinese paint subsidiary agreed to pay more than $4 million to settle federal criminal and civil violations involving shipments of the coatings to Pakistan for the plant’s construction.

In that case, PPG Paints Trading Shanghai (China) (SPT) pleaded guilty in U.S. District Court to four charges under U.S. export control laws for shipping the coatings to the Pakistan Atomic Energy Commission without the required export license.

PPG, the Pittsburgh-based parent company, avoided prosecution by entering into a two-year cooperation and non-prosecution agreement (NPA) with the Justice Department. The company paid a $750,000 civil penalty.


Tagged categories: Construction; Criminal acts; Laws and litigation; Nuclear Power Plants; PPG

Comment from Thomas Matlock, (12/6/2012, 8:41 PM)

Well, I'll admit my ignorance about the coatings. But if anyone can tell me, does this coating make the reactor safer in any way, compared to alternatives, or is this just because PPG is here in the states and violated the sanctions? And since 911, hasn't Pakistan been a 'partner' and 'ally' in the 'war on terror'? Not withstanding they exported terror FOR us against Russia and refined that talent to help Al-Qaida until 911, when they were given the choice to be an ally again, or 'be bombed back into the Stone Age', I believe was our offer. My point is, the reactor is going to be built, and we know all about their nuke program supposedly, so way the sanctions against them over this?

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