U.S. Company and Its Chinese Subsidiary Pay $3.75 Million in Criminal and Civil Fines for Export Control Violations Involving Pakistan Nuclear Facility
The Departments of Justice and Commerce announced today that PPG Paints Trading (Shanghai) Co., Ltd., a wholly-owned Chinese subsidiary of United States-based PPG Industries, Inc., pled guilty to conspiring to violate the International Emergency Economic Powers Act and the Export Administration Regulations and other related charges.
In addition to the guilty plea, PPG Paints Trading agreed to pay a $2 million criminal fine and forfeit the $32,319 in gross proceeds of the sale.
PPG Industries and PPG Paints Trading entered into a settlement agreement with BIS in which they agreed to pay civil penalties of $750,000 and $1 million respectively and undergo an audit of 2011 and 2012 export transactions.
The guilty plea resulted from actions allegedly taken by PPG Paints Trading to reexport PPG Industries' high-performance coatings from the U.S. to the Chashma 2 Nuclear Power Plant under construction in Pakistan via a third-party distributor in China without obtaining the required BIS export or reexport licenses from BIS.
A BIS export license is required to export the coatings to the Chasma 2 Nuclear Power Plant since the facility is owned by the Pakistan Atomic Energy Commission, which is included on BIS's Entity List. An export license issued by BIS is required to export or reexport all items "subject to the EAR" to PAEC nuclear facilities. (Note - this illustrates the importance of due diligence in screening end-users against the Entity List and other restricted party lists since this particular facility is not specifically named on the Entity List. Only the parent entity, Pakistan Atomic Energy Commission is named on the Entity List).
In this case, PPG Industries complied with the Entity List requirement by applying to BIS for a license to export their coatings to Chashma 2. However, the export license was denied by BIS. Following that denial, PPG Paints Trading allegedly agreed to sell the high-performance coatings to a third-party distributor in China which, in turn, would deliver the coatings to the Chashma 2 facility. In its purchase orders for the shipments in question, PPG Paints Trading apparently stated that the coatings were to be used at a nuclear power plant in China that did not require a BIS license.