PRC Corporate Entity Pleads Guilty to Conspiring to Violate IEEPA and EAR

On December 3, 2012, U.S. Bureau of Industry and Security (BIS) announced that China Nuclear Industry Huaxing Construction Co., Ltd., (Huaxing), a corporate entity owned by the People's Republic of China (PRC) and located in Nanjing, China, pleaded guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Export Administration Regulations (EAR). 

It is believed that this plea marks the first time that a PRC corporate entity has entered a plea of guilty in a U.S. criminal export matter. As part of its plea agreement, 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. 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. 

According to court documents, from June 2006 to March 2007, Huaxing conspired to export PPG Industries' high-performance coatings from the United States to Chashma II, via China, without first having obtained the required export license from BIS in violation of the EAR.  Chashma II is a PAEC power plant under construction near Kundian, Punjab province, Pakistan, and is on the list of  prohibited end users under the EAR.

Court documents provide that in January 2006, PPG Industries sought such an export license for the shipments of coatings to Chashma II. The Commerce Department denied that license application. Following that denial, the Information states, Huaxing agreed upon an arrangement whereby the high-performance coatings would be sold to a third-party distributor in China which, in turn, would deliver the coatings to Huaxing for application at Chashma II. Further, members of the conspiracy stated that the coatings were to be used at a nuclear power plant in China, the export of goods to which did not require a license from the Department of Commerce. Through these means, the transactions were structured to evade U.S. export laws by concealing that the true end-user of the coatings was Chashma II. The total value of the three illegal exports in question was approximately $32,000. 

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. Together, 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.