PPG Foreign Subsidiary Settles Export Charges with Forfeiture and $3.75 Million Fine

On December 21, 2010, U.S. Department of Justice (DOJ) reported that PPG Paints Trading (Shanghai) Co., Ltd., a wholly-owned Chinese subsidiary of U.S.-based PPG Industries, Inc. (PPG Industries), pled guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Export Administration Regulations (EAR). 

According to the charges, PPG Paints Trading actions illegally exported, reexported and/or transshipped high-performance coatings from the U.S. to the Chashma 2 Nuclear Power Plant in Pakistan via a third party distribution in the People's Republic of China. Chashma 2 is a Pakistan Atomic Energy Commission (PAEC) power plant under construction near Kundian, Punjab province, Pakistan.

The PAEC is the science and technology organization in Pakistan responsible for Pakistan's nuclear program including the development and operation of nuclear power plants in Pakistan. In November 1998, following Pakistan's first successful detonation of a nuclear device, BIS added the PAEC, as well as its subordinate nuclear reactors and power plants, to the list of prohibited end users under the EAR. As such, exports, reexports, or transshipment of any items subject to the EAR to the PAEC require a Department of Commerce license. 

According to count one of the information, in January 2006, PPG Industries sought such an export license for the shipments of coatings to Chashma 2, which was denied by the Commerce Department in June 2006. Following that denial, PPG Paints Trading agreed upon an arrangement whereby it sold the high-performance coatings to a third-party distributor in China which, in turn, delivered the coatings for application at Chashma 2. In its purchase orders for the shipments in question, PPG Paints Trading falsely stated that the coatings were to be used at a nuclear power plant in China, the export of goods to which would not require a license from the Department of Commerce.

As part of its plea agreement, PPG Paints Trading agreed to pay the maximum criminal fine of $2 million, and serve five years of corporate probation. The gross proceeds received by PPG Paints Trading for these three illegal exports was $32,319, which it forfeited as part of the plea agreement. In addition to the forfeiture and the fine, the Bureau of Industry and Security (BIS) also required an audit of 2011 and 2012 export transactions of PPG and its relevant business units in the U.S. and China, including transactions related to restricted end users on the agency's Entity List and nuclear end uses and end users.