Rep. Markey Slams New Export Rule Favoring Chinese Company

Rep. Edward Markey challenged the Commerce Department’s latest decision to give preferred export status to a Chinese company called “Aviza Technology China.”

On June 4, 2009, at a hearing of a subcommittee of the House Committee on Energy and Commerce, Rep. Edward Markey challenged the Commerce Department’s latest decision to give preferred export status to a Chinese company called “Aviza Technology China.”

Markey asked Matthew Borman, Deputy Assistant Secretary of Commerce for Export Administration, to explain why the Commerce Department approved the export of sensitive American goods to the address of a company that was punished in 2006 for illicit sales to Iran and/or Syria. Markey complained to Borman that

“The location that you have authorized to import sensitive U.S. goods, including pressure transducers, which are extremely important to uranium enrichment, is Building A23, Fuxing Road, Beijing, and these documents show the exact same address is the headquarters of a company that was sanctioned by our government for WMD-related proliferation: Building A23, Fuxing Road, China. These documents were provided to me by the Wisconsin Project on Nuclear Arms Control, which was the organization which originally blew the whistle on your VEU program. How is it that this small NGO can consistently do a better background check on these Chinese companies than you can do?”

The approved destination Markey referred to is a warehouse owned by a company, CIES, that was once (and may still be) a wholly-owned subsidiary of China National Electronics Import and Export Corporation (CEIEC), a state-owned firm that was punished (along with all of its subsidiaries) by the State Department in December 2006 for illicit sales to Iran and/or Syria. CIES, the warehouse owner, claims that in 2005 it underwent restructuring and formally changed its name from “CEIEC International Electronics Service Company” to “China International Electronics Service Co., Ltd. (CIES),” and that after this change it was no longer a subsidiary of CEIEC, and had “no relationship” with its blacklisted former parent. However, there is evidence to suggest that this split never happened at all. If it did not sensitive, militarily useful American goods may wind up in the hands of Syria or Iran.

Recent bills of lading show that at least 70 shipments from “CEIEC International Electronics Service Company” arrived in the United States in 2008, and that they continued to arrive in 2009, even though the company by that name is no longer supposed to exist. In fact, as many shipments arrived in 2008 from the supposedly-defunct predecessor company as did from the successor company that now owns the warehouse. And bills of lading from both companies give the same company address (the address that has now been declared an approved destination by the Commerce Department). It appears, therefore, that the company that owns the warehouse continues to identify itself either as part of untrustworthy CEIEC or as related to it in some way. To see examples of these bills of lading, and for additional information about the companies, click here (PDF).

The current ownership of this supposedly new company is therefore of great importance. The new company claims that it is now owned privately by nine shareholders, instead of the Chinese government. But who are these shareholders? Are any of them in fact other CEIEC subsidiaries? Also, are any of the persons who will have access to the warehouse current or former employees of CEIEC, and, if so, can the Commerce Department confirm that these individuals were not involved in the proliferation practices for which CEIEC was sanctioned? And, if the predecessor of the company no longer exists, why is its name showing up on bills of lading? More generally, how can this warehouse be considered a safe destination if it is in the building where CEIEC and its defense electronics department have their headquarters?