News

Chinese Companies Evade U.S. Trade Ban

By Matthew Godsey

A Report by the Wisconsin Project on Nuclear Arms Control

Lax enforcement of U.S. sanctions is allowing Chinese companies to continue to ship goods to the United States even after being hit with an import ban for proliferation to Iran. See Appendix listing U.S. companies that received imports from a sanctioned Chinese company since 2006. See also related story in the Wall Street Journal. (**Note: information contained in this report was presented to the Office of Foreign Assets Control (OFAC) in mid-December 2009. On December 31, 2009, after reviewing this information, OFAC added the name of one of the companies described in the report – “China JMM Import & Export Shanghai Pudong Corporation” – to its Specially Designated National (SDN) list.)

As the United States tries to muster support for stronger international sanctions against Iran, there is mounting evidence that the United States itself is not devoting the resources needed to enforce its own sanctions – notably against companies arming Iran. Tough laws have been enacted to punish such companies, but these laws are not being adequately enforced. In fact, the Wisconsin Project has discovered several instances in which two Chinese companies, sanctioned for arming Iran, have exploited holes in the U.S. sanctions regime.

These companies have managed to evade – and are still evading – one of the most powerful punishments the U.S. government can impose on a foreign company – to ban it from selling its goods in the United States. The purpose of the ban is to discourage a foreign company from conduct such as contributing to the spread of mass destruction weapons. By denying a foreign company access to the American consumer, our government can force the company to choose between what it can earn from exporting to the United States and what it can earn elsewhere from its sanctionable conduct. The hope is that the company will decide that exporting to the United States is better for its bottom line.

This strategy, however, can only work if the import ban is enforced. Unfortunately, in recent years more attention has been given to announcing prohibitions than to enforcing them. The Treasury Department’s Office of Foreign Assets Control (OFAC), which is responsible for administering and enforcing approximately 30 economic sanctions programs,[1] has seen its workload increase rapidly as new sanctions are announced and additional companies are blacklisted. Although it runs one of the U.S. government’s only effective programs for fighting weapons proliferation and publishes by far the most thorough and usable blacklists of suspect entities, OFAC has not been given nearly the resources it needs to keep up with the growth in its responsibilities. This failure to properly fund an agency widely acknowledged to play a vital role in national security is both dangerous and baffling, especially when one considers that OFAC’s 2009 budget of $32 million was roughly equivalent to the cost of a single F-18C fighter jet.[2]

China Precision Machinery Import-Export Corporation

One tangible consequence of underfunding enforcement is that American firms have been receiving prohibited imports—probably unwittingly—from foreign firms that are barred from doing business in the United States. One such firm is China Precision Machinery Import-Export Corporation (CPMIEC), a Chinese company that U.S. officials have branded a “serial proliferator” because of its long-time supply of missile technology to Iran.[3]

CPMIEC was first sanctioned by the United States in 1991 because it sold equipment for M-11 short-range ballistic missiles to Pakistan.[4] In 2002, CPMIEC was punished for missile-related sales to Iran,[5] the first in a series of sanctions that would be imposed on the company on a near-yearly basis under the then-new Iran Nonproliferation Act.[6] But these measures, while useful for drawing international attention to CPMIEC’s reckless sales, did nothing to restrict its access to the U.S. market.

In July 2003, however, CPMIEC was sanctioned by the U.S. State Department under Executive Order 12938.[7] It was the first time that CPMIEC was subjected to an import ban, a prohibition that remains in effect today. The special strength behind this measure, the part that gives it “teeth,” is the fact that the ban applies not only to CPMIEC itself, but also to any entity it owns or controls,[8] including “any subsidiaries and branches, wherever located…”[9] In June 2006, CPMIEC was also penalized under Executive Order 13382,[10] which freezes assets under U.S. jurisdiction and bans transactions with U.S. parties.[11] E.O. 13382 applies not only to the listed entity itself, but to any entity “in which it owns, directly or indirectly, a 50% or greater interest,” and applies “regardless of whether the entity itself is listed in the annex to an Executive order or otherwise placed on OFAC’s list of Specially Designated Nationals.”[12] Yet the U.S. government has never provided the names or addresses of any such CPMIEC subsidiaries, making it difficult for American buyers to figure out their identities and comply with the law.

CPMIEC Shanghai Pudong Corp./China JMM Import and Export Shanghai Pudong Corp.

Since at least 2006, American companies have been importing prohibited goods from two CPMIEC subsidiaries. The first is “CPMIEC Shanghai Pudong Corp.,” which CPMIEC lists in English as one of its subsidiaries in a brochure obtained by the Wisconsin Project.[13] The full Chinese name of this subsidiary, which CPMIEC lists in a second brochure with both English and Chinese text, translates directly as “China Precision Machinery Import-Export Shanghai Pudong Corporation.”[14] Thus, there can be no doubt that this company is a CPMIEC subsidiary and that imports into the United States from it are banned. Nevertheless, at least four shipments of goods have passed through U.S. ports since 2006 with the full name of the subsidiary listed as the shipper. Two went to U.S. consignees: the first, to “Component Supply” in Louisville, Kentucky,[15] the second to “American Forge & Foundry” in New York.[16] The two other shipments transited U.S. ports on their way to foreign destinations.[17]

A far greater number of this company’s shipments, however, have arrived in America under an alias: “China JMM Import and Export Shanghai Pudong Corp.” Although this name may not have raised red flags when run through U.S. government screening lists, it is actually an alias for CPMIEC Shanghai Pudong Corp., described above. This fact is revealed on China’s Ministry of Commerce (MOFCOM) website, which provides brief company descriptions in both Chinese and English. There, “China JMM Imp. & Exp. Shanghai Pudong Corp.” is given as the English name of a company whose name in Chinese characters translates literally as “China Precision Machinery Import and Export Shanghai Pudong Corporation.”[18] (The Chinese word for “precision” is rendered into English as “jing-mi,” so “JMM” appears to be an abbreviation for “Jingmi Machinery”).[19] Several other sources in English, such as the websites of the Canton Trade Fair and the Chinese Export Commodities Fair,[20] use the two names interchangeably, while a number of purely Chinese sources use only the “China Precision Machinery Import-Export Shanghai Pudong Corp.” version of the name, yet provide the same address and company website as the one given by China’s Ministry of Commerce.[21] In addition to these sources, the identity of the two names has been confirmed by the company itself. When asked, via email, whether the two names referred to different companies or the same company, a representative replied, “Yes, we are the same company. JMM is the abbreviation of our name.”[22]

Because it is a wholly-owned subsidiary of CPMIEC, imports from China JMM into the United States are prohibited, and U.S. companies or individuals receiving these imports are subject to civil and criminal penalties. Nonetheless, bills of lading obtained by the Wisconsin Project show that China JMM has made numerous shipments to and through the United States during the past four years, including at least 79 in 2006, at least 81 in 2007, at least 94 in 2008, and at least 49 as of November 29, 2009.[23] These shipments went to 39 different American companies and consisted of a wide range of goods, from automobile parts and textiles to pet toys.[24]

CPMIEC Fuzhou Company/Sharp Industrial Company Ltd.

The second CPMIEC subsidiary that is making prohibited shipments to the United States, and that CPMIEC identifies in its English language brochure, is “CPMIEC Fuzhou Corp.”[25] CPMIEC’s English/Chinese brochure also provides the Chinese version of this subsidiary’s name, which translates directly into English as “China Precision Machinery Import-Export Fuzhou Corporation.”[26] In 2003 this subsidiary’s address, as it appeared on the company website at the time, was “3/F, Minxing Bldg., 190, 817 Northern Street, Fuzhou, China.”[27] This is the very location identified by the Treasury Department in its import ban designation of CPMIEC in July of that year, which read “wherever located, including, 3/F, Minxing Building No. 190, 817 (North) Road, Fuzhou City, Fujian Province, China”.[28] Thus, there can be no doubt that this company is a subsidiary of CPMIEC.

Shipments from this subsidiary sent under the name “China Precision Machinery Imp and Exp Fuzhou Corp.” have gone through U.S. ports to foreign destinations several times since 2006. These shipments should have produced a “hit” during a search of the U.S. government’s screening lists, and should have been denied access to U.S. territory. The shipper’s name and address were a near match and perfect match, respectively, to CPMIEC’s U.S. government listing.[29]

This subsidiary has also been shipping directly to American buyers, but by using a different name: “Sharp Industrial Company Ltd.” In August 2005, the website for CPMIEC Fuzhou Corp. was changed abruptly to become the website for Sharp Industrial. Everything on the website remained exactly the same except for the new corporate name (unchanged were the name of the person to contact, the telephone number and address, graphic displays, the navigation bar, and the text describing the company).[30] China’s Ministry of Commerce continues to list the company under the name China Precision Machinery Import and Export Fuzhou Corp., but refers the reader to the website for Sharp Industrial.[31] Even the company itself has admitted that both names describe the same entity. When asked about the two names, a sales manager confirmed that the name was changed from “China Precision Machinery Import & Export Fuzhou Corp.” to “Sharp Industrial Company Ltd.,” but went on to explain that this change was in name only. She wrote: “Although we changed the name, the employees and business are same as before.”[32]

Three shipments arrived in the United States under the name “Sharp Industrial Company Ltd.” in 2008.[33] The U.S. consignee for all three shipments was “Amaury Int’l Corp.” in Miami. Amaury also received shipments from Sharp Industrial in 2007 and 2006, in each case for “twist drills” and other hardware.[34]

LIMMT Economic and Trade Company, Ltd.

A second Chinese company that has managed to circumvent U.S. restrictions is LIMMT Economic and Trade Company, Ltd. Over the past several years, LIMMT has been the target of both U.S. government sanctions and legal action in New York due to its continued proliferation to Iran.[35] LIMMT was penalized under Executive Order 13382 in June 2006,[36] and was the subject of E.O. 12938 sanctions in February 2009, which banned any import by LIMMT into the United States.[37] In April 2009, LIMMT was indicted in New York State on charges of falsifying business records and conspiracy.[38] In the indictment, prosecutors documented LIMMT’s repeated use of aliases and false names to evade U.S. sanctions.[39]

The Wisconsin Project has found what appears to be an additional alias that LIMMT is now using to continue exporting to customers in the United States. It is “Dalian Orient Pipe Components Co., Ltd.” There are several reasons to believe that this is the same company as LIMMT. First, its address, as listed on bills of lading obtained by the Wisconsin Project, is identical to the address for LIMMT that has been listed by the Treasury Department. The address is “2501-2508 Yuexiu Mansion, No. 82 Xinkai Road, Dalian, China.”[40] Second, on several bills of lading Dalian Orient Pipe lists the same address and same phone number as given on bills of lading for “Dalian Sunny Industry and Trade Co.,”[41] which has been identified as an LIMMT alias by the U.S. Treasury and the U.S. State Department.[42] Finally, the pattern of Dalian Orient Pipe’s exports to one U.S. customer in particular strongly suggests that Dalian was used as an alias to avoid detection. In 2006, “Dalian Sunny Industry and Trade,” an acknowledged alias for LIMMT, made seven shipments of “carbon steel forgings” to “Coastal Flange, Inc.” in Houston.[43] Beginning in 2007, bills of lading stopped showing shipments of carbon steel forgings from Dalian Sunny to Coastal Flange and began showing shipments of the same product from “Dalian Orient Pipe Components Co., Ltd” to the same company.[44] For many of these shipments to Coastal Flange, the only difference in the bills of lading from Dalian Sunny and Dalian Orient Pipe was the shipper’s name. Other essential information remained the same, including shipper and consignee addresses,[45] “notify party” information,[46] and commodity descriptions.[47]

The example of LIMMT shows that the utmost vigilance is required to maintain trade restrictions against a company that is determined to evade them. In 2004, when LIMMT was sanctioned for the first time, the State Department provided only the company’s primary name, with no aliases or name variations.[48] Two years later, when the Treasury Department initially placed LIMMT on its list, Treasury identified four name variations.[49] In April 2009, largely as a result of LIMMT’s indictment earlier in the year, Treasury published additional names and addresses, resulting in a new total of 12 aliases and four addresses for the same company.[50] Now, in light of the emergence of “Dalian Orient Pipe,” described above, it seems that even that was not enough.

Enforcement

Any U.S. company or individual found to be violating the import ban is subject to civil penalties, including a fine of as much $250,000, and if the violation is willful, criminal penalties of up to 20 years in prison.[51] In addition to actually receiving an import of goods from a banned entity, U.S. companies and individuals are also prohibited from financing, acting as a broker for, transferring, transporting, or otherwise participating in such an import, as well as any transaction that has the purpose of evading or avoiding these prohibitions.[52] None of the companies listed in the annex of this report appear to have been penalized for sanctions violations. In fact, a review of monthly reports on civil penalties imposed since 2003 under Treasury’s sanctions programs did not find any example of a U.S. company penalized for violating the import ban on CPMIEC.[53]

For the import ban to be effective, it is essential that the U.S. government identify each sanctioned company as completely as possible, including the names and addresses of all subsidiaries covered by the sanctions. For most U.S. importing companies, sanctions compliance –if done at all – consists only of checking a supplier’s name against the Treasury list or running it through interdiction software. If the search produces a “hit,” it is the importer’s responsibility to investigate further and/or contact Treasury. Yet, even the most sophisticated interdiction software is no better than the names that go into it. At present, the government is simply not providing enough data for red flags to go up when they should.

Congress needs to provide Treasury the resources and personnel required to monitor the growing number of companies sanctioned for proliferation. That is not happening today. A 2007 audit report from the Inspector General of the Treasury Department found that between 2001 and 2004, Treasury’s sanctions programs increased in number from 21 to 29, yet there was no commensurate increase in personnel to oversee them.[54] According to the testimony of a former director of Treasury’s Office of Foreign Assets Control, in 2004 personnel in OFAC’s Civil Penalties Division had an average individual workload of 477 cases.[55] Moreover, competing priorities such as the embargo on Cuba consumed most of OFAC’s time.[56] In April 2006, almost a year after E.O. 13382, dubbed “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters,” went into effect, only six percent of OFAC’s sanctions administration personnel (approximately three full time employees) were allocated to work on proliferation sanctions.[57] These three individuals were apparently responsible for compliance, licensing, enforcement, and civil penalties for all proliferation sanctions.[58] And although there has been a slight increase in funding for this work since 2006, it remains far below the level needed to truly enforce the import ban and other prohibitions.[59]

Without adequate personnel and resources devoted to enforcing nonproliferation sanctions, it is difficult to see how the prohibitions against even “serial proliferators” like CPMIEC and LIMMT can be real deterrents. Instead, these prohibitions will continue as mostly symbolic gestures, and the companies helping Iran will continue to evade them.

Appendix

Exports into the United States since 2006 by companies controlled by or acting for China Precision Machinery Import and Export Corporation (CPMIEC)

A. Exports to the United States by the CPMIEC subsidiary China Precision Machinery Import and Export Shanghai Pudong Corp. (also known as China JMM Import and Export Shanghai Pudong Corporation)

American Consignees:

1. Great China International (Corona, California)
-12 shipments in 2009.
-26 shipments in 2008.
-22 shipments in 2007.
-28 shipments in 2006.

2. Kohler Engines (Hattiesburg, Mississippi)
-2 shipments in 2009.
-10 shipments in 2008.
-18 shipments in 2007.
-4 shipments in 2006.

3. Crystal Temptations (North Arlington, New Jersey)
-6 shipments in 2008.
-11 shipments in 2006.

4. Greenlee Textron (Southaven, Mississippi)
-5 shipments in 2009.
-9 shipments in 2008.

5. Idm Llc. (Auburn, Indiana)
-11 shipments in 2008.

6. Pettraport (North Bergen, New Jersey)
-1 shipment in 2009.
-7 shipments in 2008.

7. Ivy International Trading (Chula Vista, California)
-1 shipment in 2008.
-3 shipments in 2007.
-4 shipments in 2006.

8. Electro Mechanical Industries (Houston, Texas)
-5 shipments in 2007.
-2 shipments in 2006.

9. American Sportsman Sign (Columbia, Missouri)
-1 shipment in 2007.
-6 shipments in 2006.

10. Rockwell Automation (Madison, Indiana)
-1 shipment in 2007.
-3 shipments in 2006.

11. H + H Dist. (Ann Arbor, Michigan)
-4 shipments in 2007.

12. Bright Solutions Inc. (Troy, Michigan)
-2 shipments in 2009.
-1 shipment in 2008.

13. Convert a Ball (Sidney, Nebraska)
-3 shipments in 2008.

14. Sedco Corporation (Guaynabo, Puerto Rico)
-1 shipment in 2009.
-1 shipment in 2008.

15. International Pet Supplies and Distribution (San Diego, California)
-2 shipments in 2008.

16. Orrco, Inc. (Orrville, Ohio)
-1 shipment in 2007.
-1 shipment in 2006.

17. Textile One (Los Angeles, California)
-1 shipment in 2007.
-1 shipment in 2006.

18. Oxford Textile (Los Angeles, California)
-2 shipments in 2007.

19. Amca International Inc. (Arlington Heights, Illinois)
-2 shipments in 2006.

20. Ton Qiang Construction (Corona, California)
-2 shipments in 2006.

21. Truemark International Corp. (Stafford, Texas)
-1 shipment in 2009.

22. Boca Advanced Materials (Blue Ash, Ohio)
-1 shipment in 2009.

23. N.t.t. Fashion (Bayside, New York)
-1 shipment in 2009.

24. Global Commerce System (Compton, California)
-1 shipment in 2008.

25. Decoy Motion Masters (Rogers, Minnesota)
-1 shipment in 2008.

26. Show Off Body Art (Clarkston, Michigan)
-1 shipment in 2008.

27. Ruben Badillo Sanchez (Rincon, Puerto Rico)
-1 shipment in 2008.

28. Petra Pet Inc. (North Bergen, New Jersey)
-1 shipment in 2008.

29. E.I. Dupont De Nemours (Wilmington, Delaware)
-1 shipment in 2008.

30. Dgi, Llc (Warren, New Jersey)
-1 shipment in 2008.

31. CMC Tech (Houston, Texas)
-1 shipment in 2008.

32. Millennium Int’l Group (Hillside, New Jersey)
-1 shipment in 2007.

33. Maycrick Corporation (Cincinnati, Ohio)
-1 shipment in 2007.

34. Elizondo Inc. (Laredo, Texas)
-1 shipment in 2007.

35. Esca Inc. (Laredo, Texas)
-1 shipment in 2007.

36. Welco Lumber Corp. (South Kent, Washington)
-1 shipment in 2006.

37. Standard Hardware Inc. (Euless, Texas)
-1 shipment in 2006.

38. Giant Fabric Inc. (Vernon, California)
-1 shipment in 2006.

39. Expo Convention Contractors, Inc. (Miami, Florida)
-1 shipment in 2006.

40. Component Supply (Louisville, Kentucky)
-1 shipment in 2006.

41. American Forge and Foundry (New York, New York)
-1 shipment in 2006.

B. Exports to the United States by the CPMIEC subsidiary China Precision Machinery Import and Export Fuzhou Corp. (also known as Sharp Industrial Company Limited)

American Consignees:

1. Amaury Int’l Corp (Miami, Florida)
-3 shipments in 2008.
-3 shipments in 2007.
-4 shipments in 2006.

Footnotes:

[1] “Hundreds of OFAC Civil Penalty Cases Expired Before Enforcement Action Could Be Completed,” Audit Report (OIG-07-032), Office of Inspector General, Department of the Treasury, March 2, 2007.

[2] Fact File, United States Navy World Wide Web site, http://www.navy.mil/navydata/fact_display.asp?cid=1100&tid=1200&ct=1, accessed on August 18, 2009.

[3] Testimony of Stephen G. Rademaker, Assistant Secretary for Arms Control, U.S. Department of State, before the U.S.-China Economic and Security Review Commission, March 10, 2005, available at http://www.uscc.gov/hearings/2005hearings/written_testimonies/05_03_10wrtr/
rademaker_stephen_wrts.php, accessed on August 4, 2009; Testimony of Paula A. DeSutter, Assistant Secretary of State for Verification and Compliance, before the U.S.-China Economic and Security Review Commission, July 24, 2003, available at http://www.uscc.gov/hearings/2003hearings/written_testimonies/03_07_24/tesut.htm, accessed on August 4, 2009.

[4] “Adherence to and Compliance with Arms Control, Nonproliferation, and Disarmament Agreements and Commitments,” Bureau of Verification and Compliance, U.S. Department of State, August 30, 2005, available at http://www.state.gov/t/vci/rls/rpt/51977.htm, accessed on August 4, 2009.

[5] Testimony of Paula A. DeSutter, Assistant Secretary of State for Verification and Compliance, before the U.S.-China Economic and Security Review Commission, July 24, 2003, available at http://www.uscc.gov/hearings/2003hearings/written_testimonies/03_07_24/tesut.htm, accessed on August 4, 2009.

[6] Iran Nonproliferation Act of 2000, U.S. Department of State, available at http://www.state.gov/t/isn/c15234.htm, accessed on August 4, 2009.

[7] U.S. Department of State, Bureau of Nonproliferation, “Imposition of Nonproliferation Measures on an Entity in China, Including a Ban on U.S. Government Procurement,” Federal Register 68 FR 44832, July 30, 2003.

[8] U.S. Department of State, Bureau of Nonproliferation, “Imposition of Nonproliferation Measures on an Entity in China, Including a Ban on U.S. Government Procurement,” Federal Register 68 FR 44832, July 30, 2003; “31 C.F.R. Part 539—Weapons of Mass Destruction Trade Control Regulations,” Office of Foreign Assets Control, U.S. Department of the Treasury, available at http://law.justia.com/us/cfr/title31/31-3.1.1.1.9.html, accessed on July 13, 2009.

[9] “31 C.F.R. Part 539—Weapons of Mass Destruction Trade Control Regulations,” Office of Foreign Assets Control, U.S. Department of the Treasury, available at http://law.justia.com/us/cfr/title31/31-3.1.1.1.9.html, accessed on July 13, 2009.

[10] Treasury Designates U.S. and Chinese Companies Supporting Iranian Missile Proliferation, Press Release, U.S. Department of the Treasury World Wide Web site, http://www.treasury.gov/press/releases/js4317.htm, June 13, 2006; Nonproliferation, Office of Foreign Assets Control, U.S. Department of the Treasury World Wide Web site, http://www.treasury.gov/offices/enforcement/ofac/programs/wmd/wmd.pdf, accessed on July 14, 2009.

[11] Treasury Designates U.S. and Chinese Companies Supporting Iranian Missile Proliferation, Press Release, U.S. Department of the Treasury World Wide Web site, http://www.treasury.gov/press/releases/js4317.htm, June 13, 2006.

[12] “Guidance on Entities Owned by Persons Whose Property and Interests in Property are Blocked,” Office of Foreign Assets Control, Department of the Treasury, February 14, 2008, available at http://www.treas.gov/offices/enforcement/ofac/programs/common/licensing_guidance.pdf, accessed on July 14, 2009; Weapons of Mass Destruction Proliferators Sanctions Regulations, Office of Foreign Assets Control, U.S. Department of the Treasury, Federal Register Vol. 74, No. 69, April 13, 2009, pp. 16771-16781.

[13] CPMIEC brochure obtained by the Wisconsin Project, undated.

[14] China National Precision Machinery Import & Export Corporation, undated brochure, available at NEFA Foundation World Wide Web site, http://www.nefafoundation.org/miscellaneous/FeaturedDocs/
US_v_WangWoodford_exhibitB.pdf, accessed on July 21, 2009.

[15] Bill of Lading (B/L: ORLCSHUSA509457E).

[16] Bill of Lading (B/L: EXDO6394190625).

[17] Bill of Lading (B/L: COHE0604455C); Bill of Lading (B/L: MOLU484949879).

[18] China JMM Imp. & Exp. Shanghai Pudong Corp., China Commodity Net, Ministry of Commerce World Wide Web site, http://ccn.mofcom.gov.cn/249702, accessed via Google cache on July 14, 2009.

[19] China JMM Imp. & Exp. Shanghai Pudong Corp., China Commodity Net, Ministry of Commerce World Wide Web site, http://ccn.mofcom.gov.cn/249702, accessed via Google cache on July 14, 2009.

[20] China JMM Import & Export Shanghai Pudong Corp., Chinese Export Commodities Fair World Wide Web site, http://www.cecf.com.cn/web/en/seller/26741934.html, accessed on July 16, 2009; China JMM Import & Export Shanghai Pudong Corporation, Canton Trade Fair World Wide Web site, http://promoter.cantonfair.org.cn/pages/
simply.aspx?version=en&corpid=0731006928&TopPage_search_bound=exp, accessed on June 24, 2009.

[21] Import-Export Representatives, Global Importer World Wide Web site, http://china/globalimporter.net/cgongqiu/35/87/1897552.html (in Chinese), accessed on July 16, 2009; China Precision Machinery Import-Export Shanghai Pudong Corporation, China Import Export Agent World Wide Web site, http://www.cniea.cn/co.asp?id=13590 (in Chinese), accessed on July 22, 2009; China Precision Machinery Import-Export Shanghai Pudong Corporation, Alibaba World Wide Web site, http://china.alibaba.com/company/detail/contact/thomaswy.html (in Chinese), accessed on July 14, 2009; China JMM Imp. & Exp. Shanghai Pudong Corp., China Commodity Net, Ministry of Commerce World Wide Web site, http://ccn.mofcom.gov.cn/249702, accessed via Google cache on July 14, 2009.

[22] Email communication with China JMM Imp/Exp Shanghai Pudong Corp, July 17, 2009.

[23] Commercial bill of lading database searches for 2006, 2007, 2008, and 2009 shipments from shipper “China JMM,” conducted September 9, 2009.

[24] Commercial bill of lading database search for 2006, 2007, 2008, and 2009 shipments from shipper “China JMM”; Bill of Lading (B/L: ACJJSHA08110157); Bill of Lading (B/L: CHHKXSHLGB3AY990); Bill of Lading (B/L: NAQASNYC9402481W).

[25] CPMIEC brochure obtained by the Wisconsin Project, undated.

[26] China National Precision Machinery Import & Export Corporation, undated brochure, available at NEFA Foundation World Wide Web site, http://www.nefafoundation.org/miscellaneous/FeaturedDocs/
US_v_WangWoodford_exhibitB.pdf, accessed on July 21, 2009.

[27] Introduction, China Precision Machinery Imp. & Exp. Fuzhou Corp. World Wide Web site, accessed via http://web.archive.org/web/20030621070233/http://www.cutting-tools.com.cn/, accessed on August 10, 2009.

[28] Recent OFAC Actions, July 30, 2003, Office of Foreign Assets Control, U.S. Department of the Treasury, available at http://www.treas.gov/offices/enforcement/ofac/actions/20030730.shtml, accessed on August 10, 2009.

[29] Bill of Lading (B/L: DMERDFS670052880); Bill of Lading (B/L: CHHKXSHMTR3AT659).

[30] Introduction, China Precision Machinery Imp. & Exp. Fuzhou Corp. World Wide Web site, accessed via www.archive.org at http://web.archive.org/web/20050407172241/http://www.cutting-tools.com.cn on August 10, 2009; Welcome to China Precision Machinery Imp. & Exp. Fuzhou Corp. World Wide Web site, accessed via www.archive.org at http://web.archive.org/web/20050406092040/http://www.cutting-tools.com.cn on August 10, 2009; Welcome to Sharp Industrlal Company Limited, Sharp Industrlal Company Limited World Wide Web site, accessed via www.archive.org at http://web.archive.org/web/20050828153100/http://www.cutting-tools.com.cn, accessed on May 14, 2009.

[31] China Precision Machinery Import and Export Fuzhou Corp., China Commodity Net, Ministry of Commerce World Wide Web site, http://ccne.mofcom.gov.cn/html/crse/product.php?ls_fileno=10033291, accessed on July 15, 2009.

[32] Email communication with Sharp Industrial Company Ltd., July 20, 2009; Email communication with Sharp Industrial Company Ltd., July 18, 2009.

[33] Bill of Lading (B/L: PRSHMZ31973A).; Bill of Lading (B/L: PRSHMZ31615E); Bill of Lading (B/L: PRSHMZ32697F).

[34] Bill of Lading (B/L: NAQASMIA7413493W); Bill of Lading (B/L: NAQASMIA6353698W).

[35] Indictment, The People of the State of New York v. Li Fang Wei et. al., Supreme Court of the State of New York, County of New York, available at http://manhattanda.org/whatsnew/press/2009-04-07/Indictment%20LFW%20and%20Limmt%20%20FINAL.pdf, accessed on July 24, 2009.

[36] Changes to List of Specially Designated Nationals and Blocked Persons Since January 1, 2006, Office of Foreign Assets Control, U.S. Department of the Treasury World Wide Web site, http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdnew.pdf, accessed on June 14, 2006; Nonproliferation, Office of Foreign Assets Control, U.S. Department of the Treasury World Wide Web site, http://www.treasury.gov/offices/enforcement/ofac/programs/wmd/wmd.pdf, accessed on June 14, 2006.

[37] U.S. Department of State, Bureau of International Security and Nonproliferation,
“Imposition of Nonproliferation Measures on Two Chinese Entities and Two Iranian Entities,” Federal Register Vol. 74, No. 20, p. 5883, February 2, 2009.

[38] News Release, New York County District Attorney’s Office, April 7, 2009, available at http://manhattanda.org/whatsnew/press/2009-04-07.shtml, accessed on August 10, 2009.

[39] Indictment, The People of the State of New York v. Li Fang Wei et. al., Supreme Court of the State of New York, County of New York, available at http://manhattanda.org/whatsnew/press/2009-04-07/Indictment%20LFW%20and%20Limmt%20%20FINAL.pdf, accessed on July 24, 2009.

[40] Bill of Lading (B/L: FGWIUMSCGG65102F); Recent OFAC Actions, Office of Foreign Assets Control, U.S. Department of the Treasury, April 7, 2009, available at http://www.treas.gov/offices/enforcement/ofac/actions/20090407.shtml, accessed on May 12, 2009.

[41] Bill of Lading (B/L: FGWIUMSCGG65102F); Bill of Lading (B/L:FGWIUMSCGG70310F); Bill of Lading (B/L: UPSPTJN06030246); Bill of Lading (B/L: UPSPTJN06040266); Bill of Lading (B/L: DSIEJXG07064006).

[42] U.S. Department of State, Bureau of International Security and Nonproliferation,
“Imposition of Nonproliferation Measures on Two Chinese Entities and Two Iranian Entities,” Federal Register Vol. 74, No. 20, p. 5883, February 2, 2009; “Treasury Designates Iranian Proliferation Network and Identifies New Aliases,” Press Release, April 7, 2009, U.S. Department of the Treasury, available at http://www.treas.gov/press/releases/tg84.htm, accessed on April 27, 2009.

[43] Bill of Lading (B/L: UPSPTJN06040266); Bill of Lading (B/L: UPSPTJN06030246); Bill of Lading (B/L: FGWIUMSCGG60217F); Bill of Lading (B/L: FGWIUMSCGG60401F); Bill of Lading (B/L: UPSPTJN06030299); Bill of Lading (B/L: FGWIUMSCGG60406F); Bill of Lading (B/L: RCKI183XINHOU02).

[44] Commercial bill of lading database search for 2007, 2008, and 2009 shipments from shipper “Dalian Sunny Industry,” conducted September 9, 2009; Commercial bill of lading database search for 2006 and 2007 shipments to consignee “Coastal Flange,” conducted September 10, 2009; Commercial bill of lading database search for 2006 and 2007 shipments to consignee “Coastal Flanges,” conducted September 10, 2009.

[45] Bill of Lading (B/L: FGWIUMSCGG60401F); Bill of Lading (B/L: RCKI206XINHOU04); Bill of Lading (B/L: UPSPTJN06030299); Bill of Lading (B/L: PUDGTJ023697).

[46] Bill of Lading (B/L: RCKI183XINHOU02); Bill of Lading (B/L: RCKI200XINHOU06).

[47] Bill of Lading (B/L: RCKI183XINHOU02); Bill of Lading (B/L: RCKI200XINHOU06).

[48] “Imposition of Nonproliferation Measures Against Fourteen Foreign Entities, Including Ban on U.S. Government Procurement,” U.S. Department of State, Bureau of Nonproliferation, Federal Register Vol. 69, No. 188, pp. 58212-58213, September 29, 2004.

[49] Recent OFAC Actions, Office of Foreign Assets Control, U.S. Department of the Treasury, June 13, 2006, available at http://www.ustreas.gov/offices/enforcement/ofac/actions/20060613.shtml, accessed on August 4, 2009.

[50] “Additional Designation of Persons and Identification of New Aliases Pursuant to Executive Order 13382,” U.S. Department of the Treasury, Office of Foreign Assets Control, Federal Register Vol. 74, No. 81, pp. 19635-19636, April 29, 2009.

[51] “31 C.F.R. Part 539—Weapons of Mass Destruction Trade Control Regulations,” Office of Foreign Assets Control, U.S. Department of the Treasury, available at http://law.justia.com/us/cfr/title31/31-3.1.1.1.9.html, accessed on July 13, 2009.

[52] “31 C.F.R. Part 539—Weapons of Mass Destruction Trade Control Regulations,” Office of Foreign Assets Control, U.S. Department of the Treasury, available at http://law.justia.com/us/cfr/title31/31-3.1.1.1.9.html, accessed on July 13, 2009.

[53] Review of monthly civil penalties reports from 2003-2009, available at Office of Foreign Assets Control, U.S. Department of the Treasury World Wide Web site, http://www.treasury.gov/offices/enforcement/ofac/civpen/index.shtml, accessed on September 9, 2009.

[54] “Hundreds of OFAC Civil Penalty Cases Expired Before Enforcement Action Could Be Completed,” Audit Report (OIG-07-032), Office of Inspector General, Department of the Treasury, March 2, 2007.

[55] “Hundreds of OFAC Civil Penalty Cases Expired Before Enforcement Action Could Be Completed,” Audit Report (OIG-07-032), Office of Inspector General, Department of the Treasury, March 2, 2007.

[56] “Hundreds of OFAC Civil Penalty Cases Expired Before Enforcement Action Could Be Completed,” Audit Report (OIG-07-032), Office of Inspector General, Department of the Treasury, March 2, 2007.

[57] “Weapons of Mass Destruction: Stopping the Funding-the OFAC Role,” Hearing before the Subcommittee on Oversight and Investigations of the Committee on Financial Services, U.S. House of Representatives, February 16, 2006, available at www.house.gov/financialservices/media/pdf/109-73.pdf, accessed on August 11, 2009.

[58] “Weapons of Mass Destruction: Stopping the Funding-the OFAC Role,” Hearing before the Subcommittee on Oversight and Investigations of the Committee on Financial Services, U.S. House of Representatives, February 16, 2006, available at www.house.gov/financialservices/media/pdf/109-73.pdf, accessed on August 11, 2009.

[59] “Senate Report 110-129 – Financial Services and General Government Appropriations Bill, 2008,” available at http://thomas.loc.gov/cgi-bin/cpquery/
?&sid=cp110AQGta&refer=&r_n=sr129.110&db_id=110&item=&sel=TOC_27967&, accessed on August 12, 2009.

Pakistan Nuclear Milestones, 1955-2009

1955: Establishment of Pakistan Atomic Energy Commission (PAEC).

1965: Prime Minister Zulfikar Ali Bhutto announces “If India builds the bomb, we will eat grass or leaves, even go hungry. But we will get one of our own.”

November 1965: The 5 MWt Pakistan Research Reactor (PARR-1), fueled with highly enriched uranium (HEU), achieves criticality.

1970s: Pakistan reportedly obtains technology and equipment for the New Labs reprocessing plant from Belgium and France, with the majority coming from Belgonucleaire, according to Pakistani sources.

1971: Pakistan’s 125 MWe Karachi Nuclear Power Plant (KANUPP) pressurized heavy water reactor (PHWR) becomes operational. According to a report from the American Nuclear Society, Canadian General Electric Co. has served as the supplier, architect-engineer, and constructor of the facility.

1972: Z.A. Bhutto gathers Pakistan’s top scientists at Multan, and orders them to build an atomic bomb.

1972: Dr. Abdul Qadeer Khan (a.k.a. A.Q. Khan) reportedly begins work in Amsterdam at the engineering company Physical Dynamics Research Laboratory (FDO), which worked closely with the Urenco uranium consortium.

1974: India conducts its first nuclear test.

1976: A.Q. Khan becomes director of the Engineering Research Laboratories at Kahuta.

1976: Canada terminates the supply of technical assistance, spare parts, and fuel to Pakistan’s KANUPP nuclear facility.

April 1978: According to A. Q. Khan, Pakistan achieves its first centrifugal enrichment of uranium in Rawalpindi.

1979: The United States suspends economic and military aid to Pakistan under section 669 of the Foreign Assistance Act of 1961, after receiving what it believes to be credible evidence of Pakistan’s covert construction of an uranium enrichment facility.

Early 1983: According to A. Q. Khan, Pakistan achieves ninety percent enrichment of uranium.

1984: Kahuta enrichment plant produces enriched uranium. Pakistan’s President General Mohammed Zia ul-Haq is quoted as saying that “Pakistan has acquired very modest research and development capability of uranium enrichment very successfully,” emphasizing that it is for “nothing but peaceful purposes.”

1984: According to A. Q. Khan, Pakistan possesses a nuclear bomb that can be detonated in one week’s notice.

1985: Congress passes the Pressler Amendment conditioning U.S. aid on whether the U.S. can certify Pakistan does not possess a nuclear explosive device.

1986: According to a classified Defense Intelligence Agency (DIA) report cited in the press, Pakistan has succeeded in enriching uranium to 93.5 percent at Kahuta and has been developing the mechanisms necessary for nuclear explosions.

1988: Pakistan and India agree to exchange lists of nuclear installations, as part of an agreement not to attack each others’ nuclear facilities. The first exchange occurs in January 1992.

1989: Pakistan’s 30 kW PARR-2 research reactor achieves criticality.

Late 1980s: Pakistan reportedly completes a computerized “cold test” of its nuclear weapon technology, according to retired army chief of staff Mirza Aslam Beg.

1990: France announces approval of the sale of a nuclear power plant to Pakistan, ending a 14-year embargo.

1990: President Bush can no longer certify Pakistan has no nuclear weapons. The United States suspends military aid to Pakistan.

1991: China and Pakistan conclude an agreement for cooperation in constructing a 300 MWe reactor at Chashma. The China Chongyuan Engineering Corporation (CZEC) is to execute the project for China’s National Nuclear Corporation.

1992: Pakistani Foreign Minister Shahryar Khan says Pakistan has the components and know-how to make at least one nuclear explosive “device.”

1994: German officials announce the seizure of preforms for gas centrifuge scoops destined for Pakistan.

1995: On a visit to Washington, Prime Minister Benazir Bhutto says her country does not have nuclear weapons and lobbies for the delivery of American F-16 aircraft to Pakistan.

February 1996: British customs seize a shipment of Swedish laser measuring equipment intended for a Pakistani company known to be a front for Pakistan’s nuclear weapon program.

February 1996: The U.S. Central Intelligence Agency (CIA) reveals that China covertly sold 5,000 ring magnets to Pakistan’s A.Q. Khan Research Laboratories.

September 1996: China secretly sells an industrial furnace and high-tech diagnostic equipment with military applications to “unsafeguarded nuclear facilities in Pakistan.”

December 1996: Pakistan’s Foreign Ministry announces that China will build a second nuclear power plant in Pakistan.

1997: According to former Pakistani Army Chief Mirza Aslam Beg, Pakistan has completed computer simulations of a nuclear weapon explosion.

April 1998: A 50-MW (thermal) plutonium production reactor in Khushab reportedly goes operational.

May 1998: Pakistan conducts nuclear tests in the Chagai Hills. According to American scientists the first explosion measured 4.8 to 4.9 in magnitude, corresponding to a yield of 8 to 17 kilotons. The second blast, two days later, recorded a magnitude of only 4.3, corresponding to a yield of 1 kiloton, suggesting that the test was of a smaller device or that it failed. A.Q. Khan claimed that Pakistan tested “a big bomb which has a yield of about 30-35 kilotons, and four small, tactical weapons of low yield.” He also stated that uranium was used as the fissile material and none of the explosions were thermonuclear.

June 1998: Pakistan and India announce a moratorium on further nuclear weapons tests.

June 1998: The foreign ministers of the United States and seven other industrialized countries announce that they would act together to postpone loans to Pakistan by international financial institutions, including the International Monetary Fund (IMF) and the World Bank.

January 1999: The World Bank and the International Monetary Fund renew lending to Pakistan after the U.S. drops its opposition to multilateral aid.

February 1999: According to Ishfaq Ahmed, Chairman of the PAEC, Pakistan is self-reliant in the production of heavy water, enriched uranium, zirconium and spare parts for its nuclear program.

May 1999: Saudi defense minister Prince Sultan visits Pakistan’s secret nuclear facilities at Kahuta and a missile factory, raising Western concerns that Saudi Arabia may be interested in acquiring nuclear weapons. Saudi Arabia denies any such intentions.

July 1999: British customs intercepts 20 tons of key components used in manufacturing nuclear weapons, including high-grade aluminum, destined for Pakistan.

August 1999: A Pakistani official claims that Pakistan can “build a nuclear weapon of any type or size, including [a] neutron bomb.”

November 1999: PAEC announces it is developing a new uranium field in Tumman Leghari. Its uranium mining project at Baghalchar is being closed because “there are no more uranium reserves in the region,” and not because of international pressure.

February 2000: Establishment of a comprehensive command and control structure for Pakistan’s nuclear forces. The components are the National Command Authority, Strategic Plans Division and Strategic Forces Commands.

March 2000: According to U.S., French, and Pakistani officials, Pakistan reportedly smuggled in a heavy water production plant based on hydrogen sulfide exchange technology and set it up in Khushab. The plant generated heavy water for the Khushab reactor that became operational in 1998.

June 2000: Pakistan’s 300 MWe Chashma Nuclear Power Plant (CHASNUPP-1) pressurized water reactor (PWR), constructed by China National Nuclear Cooperation (CNNC) and China Nuclear Construction Cooperation (CNCC), becomes operational.

June 2000: The PAEC is reportedly operating an upgraded pilot reprocessing facility at New Labs in Rawalpindi to separate plutonium from spent fuel discharged from the unsafeguarded heavy water reactor at Khushab.

2000-2002: Pakistan reportedly starts construction of a second plutonium production reactor at Khushab.

January-June 2001: The U.S. Central Intelligence Agency (CIA) states that Pakistan continues to acquire nuclear-related equipment and materials from a variety of sources, “principally” in Western Europe. In spite of China’s May 1996 pledge not to assist any unsafeguarded nuclear facilities, the CIA “cannot rule out” the possibility of continued contact between Chinese and Pakistani entities on nuclear weapons development.

September 2001: U.S. President George Bush lifts sanctions against India and Pakistan imposed under the Arms Export Control Act.

November 2001: Pakistan reportedly detained two nuclear scientists and begun questioning them on their alleged connections to Osama bin Laden and Al Qaeda. Sultan Bashiruddin Mahmood, who assisted in Pakistan’s uranium enrichment efforts, and Abdul Majeed, who worked at PAEC until 1999, both admit having met with Osama bin Laden and Mohammad Omar on at least three occasions in 2000, but insist these meetings were in connection with a relief agency.

January 2003: The periodical Nuclear Fuel cites unnamed sources as stating that Pakistan provided North Korea and Iran with detailed Khan Research Laboratory (KRL) centrifuge design information, stolen from the Urenco program during the 1970s and 1980s.

Early 2003: Pakistan’s Prime Minister Mir Zafarullah Khan Jamali and Chinese premier Wen Jiabao sign a memorandum of understanding for construction of a second 300 MWe PWR, the Chashma Nuclear Power Plant unit (CHASNUPP-2).

July-December 2003: The CIA states that Iran and Libya have previously received “designs for Pakistan’s older centrifuges, as well as designs for more advanced and efficient models, and components.”

February 2004: A.Q. Khan is fired from his government position after investigators discover that he made millions of dollars from the sale of nuclear-related blueprints and technical assistance to Iran and Libya through a nuclear black market. Khan confesses to nuclear technology and enrichment technology transfers, involving North Korea, Iran, Libya, and Malaysia, beginning in the mid-1980s.

February 2004: Pakistan’s President General Pervez Musharraf grants a full pardon to A.Q. Khan.

March 2004: According to Nigeria’s defense ministry, Pakistan’s Military Chief of Staff, General Muhammad Aziz Khan, announces that Pakistan is considering how best to “assist Nigeria’s armed forces to strengthen its military capability and to acquire nuclear power.”

May 2004: PAEC Chairman Parvez Butt and CNNC President Kang Rixin sign a deal to build CHASNUPP-2 at Chashma, under plant-specific inspections.

June 2004: India and Pakistan announce in a joint statement their decision to establish dedicated hotlines between their foreign secretaries and to upgrade bilateral military hotlines. The improvements are to prevent misunderstandings and to help avoid an accidental nuclear war.

September 2004: Pakistan’s national legislation entitled “Export Control on Goods, Technologies, Material and Equipment Related to Nuclear and Biological Weapons and Their Delivery Systems Act, 2004” comes into force. The regulations, which carry up to 14 years of imprisonment and Rs5 million in fines, apply to Pakistani citizens at home or abroad, foreign nationals in Pakistan’s territory, as well as ground, air, or ship transport registered in Pakistan.

March 2005: The PAEC has reportedly decided to establish new laboratories and facilities to counteract the “very serious threats/problems of embargo by foreign companies towards the supply of high-precision scientific and technical equipment and material,” by requesting government approval for Rs2.5 billion to upgrade and expand the Pakistan Institute of Nuclear Science and Technology (Pinstech).

April 2005: Construction begins on the Chashma Nuclear Power Project Unit-2 (CHASNUPP-2).

May 2005: Japan makes public its decision to lift all economic sanctions imposed on Pakistan following its nuclear tests.

August 2005: A “senior official” reportedly states that after nine months of reviewing data collected by International Atomic Energy Agency (IAEA) inspectors, a group of scientists from the United States, France, Japan, Britain and Russia have definitively matched traces of HEU found in Iran with samples obtained from centrifuge equipment provided by Pakistan to the IAEA.

August-September 2005: Pakistan’s President, General Pervez Musharraf, confirms for the first time that A.Q. Khan provided North Korea with “centrifuges – parts and complete,” amounting to “probably a dozen.” Musharraf also states that Khan may have sent uranium hexafluoride to North Korea. In making these statements, Musharraf continues to assert that the Pakistan’s military was not aware of A.Q. Khan’s activities.

Mid-2006: Pakistan reportedly starts construction of a third plutonium production reactor at Khushab.

October 2007: Pakistan’s Executive Committee of the National Economic Council has approved construction of a Chemical Processing Plant (CPP) and Nuclear Fuel Enrichment Plant (NFEP). These projects are reportedly part of the Pakistan Nuclear Power Fuel Complex to be built at Kundian, which will also include a fuel fabrication plant, a fuel-testing laboratory and a tubing plant. Work on the fuel fabrication and tubing plants is reportedly underway.

2007: The Strategic Export Control Division (SECDIV) is set up to administer export controls related to the “Export Control on Goods, Technologies, Material and Equipment Related to Nuclear and Biological Weapons and Their Delivery Systems Act, 2004”.

2007: The commercial scale plutonium reprocessing facility at Chashma is reportedly nearing completion.

January 2009: Construction of the buildings associated with the second plutonium production reactor at Khushab appears to be completed. The second reactor could start in the near future.

March 2009: According to U.S. intelligence, Pakistan continues to develop its nuclear infrastructure and expand nuclear weapon stockpiles while seeking more advanced warheads and delivery systems.

September 2009: According to one estimate, Pakistan has approximately seventy to ninety nuclear weapons.

Testimony: Export Administration Act: A Review of Outstanding Policy Considerations

By Arthur Shulman

Testimony of Arthur Shulman

General Counsel, Wisconsin Project on Nuclear Arms Control

Hearing on the Export Administration Act:A Review of Outstanding Policy Considerations
Before the House Committee on Foreign Affairs Subcommittee on Terrorism, Nonproliferation, and Trade

July 9, 2009

I am pleased to appear before this distinguished Subcommittee to discuss dual-use export controls, and their role in stemming the spread of mass destruction weapons.
I will cover four topics. First, the importance of strong and effective export controls for U.S. national security; second, the resources and authorities required to enable our export control officials to do their jobs properly; third, the need to improve industry’s ability to police itself; and fourth, ways to address the risks of transshipment and diversion at home and abroad.

A matter of national security

The Export Administration Act (EAA) is the foundation of our system for controlling the export of dual-use, militarily sensitive technologies from the United States. For most of the last two decades, this key statute has been in lapse. The dual-use export control system has continued to operate on an emergency basis, under the authority of the International Emergency Economic Powers Act (IEEPA). Efforts to reauthorize the EAA have been driven by industry, seeking to lower controls under the guise of “modernizing” the system and making it less “burdensome” and more “efficient.” The Export Administration Act remains in lapse because Congress, in its wisdom, has refused to undermine our national security by adopting these proposals.

Are dual-use export controls a burden on U.S. industry? The facts speak for themselves. An analysis by the Government Accountability Office (GAO) showed that in 2005, 99.81 percent of exports subject to the Export Administration Regulations (EAR) left the United States without an export license, including 98.5 percent of items on the Commerce Control List. And even for the tiny fraction of dual-use trade that required an export license, the Commerce Department denied only 1.4 percent of the license applications it processed during that period (FY2005), while lowering processing times. Two years later, denials were at 0.88 percent. One almost wonders, what’s left for industry to complain about?

The focus of export control reforms should be on ensuring that the system protects U.S. national security in the 21st century – not on removing the remaining speed bumps on the export superhighway. While the EAA has been in lapse, the export control system has not been updated to reflect the post-Cold War and post-9/11 security environment. The GAO has lamented the absence of a comprehensive, public analysis of the current security challenges, how the dual-use export control system is meeting these challenges, and what changes are needed. Commerce apparently conducted an ad hoc review after the events of September 2001, but decided that no fundamental changes were needed. Thanks to the efforts of this Subcommittee, our nation’s arms exports will be subjected to a comprehensive national security review if H.R. 2410 becomes law. The same must be done for dual-use trade. Only then would we have the hard data needed for thinking about a new Export Administration Act – one that would protect our security in the present and future.

In the interim, we must ensure that the current system is working well to protect us. In many ways, it is not, but there are things we can do now to change that. Congress should give the Bureau of Industry and Security (BIS) at Commerce enough resources to do the job it has now. Congress should also provide robust oversight to ensure that those resources are being used well.

More for Export Enforcement

I would like to note a recent article by Darryl Jackson, formerly Assistant Secretary of Commerce for Export Enforcement. Mr. Jackson notes the need for the dual-use export enforcement officials in the Bureau of Industry and Security to carry out their crucial mission with “maximum effectiveness.” Export enforcement agents need to be able to conduct investigations abroad, to go undercover and to set up wiretaps, to deter and punish criminals by seizing profits and assessing higher penalties. Mr. Jackson suggests that Congress pass a standalone bill immediately that would give OEE permanent law enforcement authority. This Subcommittee introduced just such a provision last year in H.R. 6828, and should do so again in this new Congress.

Another issue is that BIS export enforcers do not have sufficient personnel and funding. At present, OEE has more than 800 open cases – but fewer than 100 special agents to work them, throughout the country. These staffing and resource levels have remained static for years – but violators have not. The budget request for FY2010 would provide an additional 3 persons to OEE. That is a start, but not enough. Additional staff and resources for enforcement should be a priority for Congress.

Safer Export Administration

Additional resources would also help with another problem. During several lean years, BIS has tried to shrink its workload by doing away with license requirements. An example is the “Validated End-User” (VEU) program, which I discussed in my testimony before this Subcommittee last year. Launched in 2007, the program allows select foreign companies to receive controlled dual-use goods without otherwise-required export licenses. An interagency committee is supposed to choose companies and locations posing little or no risk of diversion. But our initial report on the program, published in January 2008, revealed that two of the first five Chinese companies designated as VEUs were closely linked to China’s military-industrial complex, to Chinese proliferators sanctioned by the United States, and to U.S. companies accused of export violations. BIS hand-picked those companies, tellingly noting that they accounted for 18% of licensed U.S. exports to China. And BIS reportedly estimated that the next batch of five Chinese VEU candidates would account for 90 percent of exports to China subject to BIS licensing, when combined with the original five VEUs. Since then, one additional Chinese VEU was designated in April (the other four candidates are presumably still in the pipeline). My organization analyzed this designation, and our analysis revealed that components useful in gas centrifuge enrichment plants can now be shipped, without limits or prior scrutiny, to a building that houses the headquarters of a Chinese company which, as recently as December, was under U.S. sanctions for proliferation to Iran and/or Syria. I ask that this analysis be made part of the record for this hearing.

The VEU program has been not only a selection failure but also a verification cripple. In January, BIS finally secured Chinese consent to the post-shipment inspections required under the program. That’s eighteen months after the program’s launch, and over a year after the first VEUs were freed to receive sensitive exports license-free. In the interim, the GAO highlighted the risk of unverified license-free exports and pointed out other flaws in the program. Yet even now, on-site VEU reviews require a 60-day notice and must be arranged and accompanied by Chinese government officials. Also, Commerce has just announced the first VEU designation for India. How will verification work there?

Given these fundamental flaws, limitations and unknowns, the VEU scheme should be scrapped. At the very least, a moratorium on new designations should be imposed, as Congress studies whether the program can operate without undermining our security. The VEU program and other “trusted customer” initiatives decrease our government’s role in controlling sensitive exports. This creeping abrogation of a key national security function is highly risky. By eliminating the pre-shipment checks performed by licensing officers, the responsibility for spotting and preventing diversion attempts shifts even more to the exporter – who may lack the necessary training and resources – and to customs officials, who may lack the ability to screen license-free exports adequately before they leave U.S. ports. Congress should scrutinize such initiatives closely, and ensure that they are not driven by resource shortages at BIS.

More help for industry to protect our national security

Industry is the first line of defense in our current system for controlling militarily useful trade. Nevertheless, industry is still not getting enough help from the government in safeguarding our safety. One example is the Entity List maintained by BIS. The List is supposed to be a primary means for informing exporters about foreign entities that pose a risk of diversion – especially to mass destruction weapon programs around the world. An exporter usually must apply to BIS for a license before selling a controlled item to an entity on the List. But, as I explained in my testimony last year, the List is incomplete and out of date, especially its China section. Some entries are now inaccurate, and others are not usable.

Despite criticism from auditors and requests from industry and national security advocates, little has been done to improve the List. My organization has submitted to BIS concrete proposals for updating this crucial national security resource. Last year, we grew tired of waiting and posted on our website (at www.wisconsinproject.org) an annotated version of the Entity List’s China section, complete with updated entity names (including in Chinese) and addresses.

Despite our hopes, however, BIS has made none of these changes. The agency did finally commit to annual reviews of the List. But so far, the review process has only resulted in removals of listed entities. The agency has also instituted a formal petition process for removal from the list – and has already removed one company as a result. There is no corresponding public procedure to request addition of risky end-users. BIS has also begun to use the List to identify entities not directly linked to proliferation or to terrorism, but implicated in various smuggling networks, for example. So, the List now has more names, but it is not more accurate or clear, and has lost its focus on nonproliferation. Congress should press BIS to make the Entity List a real tool for exporters to screen their transactions and prevent diversions.

Combating Illicit Transshipment and Diversion

This Subcommittee has taken a leadership role in addressing the risks of transshipment and diversion of dual-use U.S. goods. Last year, I testified about the history of illicit transshipment through the United Arab Emirates (UAE). I would like to offer for inclusion in the hearing record an updated chronology documenting how Dubai and other points in the UAE have served for decades as the main hubs in the world for nuclear and other smuggling. Authorities in the United States and elsewhere are still bringing criminal cases against smugglers shipping dangerous goods through the UAE. We have also seen such activity channeled through Malaysia and other countries with weak export controls – expanding the geography of this threat.

A recent GAO investigation highlighted another aspect of the problem – domestic sales. Using a credit card and little else, the GAO was able to buy a variety of highly sensitive items controlled for export, including switches usable for triggering nuclear weapons. Since the items were first delivered within the United States, little or no scrutiny of the sales was required by law. Then, the investigators shipped dummy versions of the items to a country known as a transshipment and diversion point, entirely evading customs scrutiny of the exports. This operation reproduced a scheme used repeatedly by those intent on illicit acquisition of controlled dual-use technology from the United States.

There are things we can do to meet these challenges. For instance, additional resources would allow BIS to expand its successful program of outreach visits to industry – particularly smaller businesses. Such visits increase awareness of export control requirements and diversion threats, and often lead to tips about suspicious acquisition attempts. In addition, BIS must get more staff and resources to verify abroad that exported sensitive technology ends up and remains in authorized locations and uses. And both Customs agencies should be given direction and resources to prioritize export control review of outgoing shipments and verification of industry self-policing activities.

Revisions to the Automated Export System (AES) proposed by this Subcommittee last year in H.R. 6828 also hold great potential. Mandatory, real-time linkages and automated cross referencing could be set up between export license data, shipment information and enforcement records. Such automation would make work by export compliance and enforcement officials much more efficient, by flagging problem transactions for investigation before they cross the border. The AES revisions would also help exporters, by facilitating classification decisions and by automatically screening transactions against restricted party lists. Such services are now available commercially, but they are too expensive for smaller businesses. Government should make these crucial decisions easier for exporters, without relieving them of responsibility for knowing their products and customers.

We should also do all we can to encourage systematic reporting by industry of suspicious acquisition attempts. So far, only a handful of individual companies in Europe and the United States have established such relationships with their regulators. Systematic reporting by industry would generate a tremendous amount of data, which could be analyzed and used to uncover and defeat proliferation networks. Industry should also be incentivized to embed anti-diversion technology – including tracking chips and immobilizers – in sensitive equipment controlled for export. A few companies do this already, but more widespread adoption of such measures must be encouraged. On the other hand, robust enforcement and heavy penalties must also be maintained, to punish criminals and to deter the reckless and the would-be violators.

Finally, the United States should do more to convince our friends and allies to maintain effective controls on strategic trade, and to supply practical training and assistance to countries trying to do a better job. But those who refuse to do their part, and who facilitate dangerous trade through their territories, should not be spared. The UAE continues to be a problem in this regard. The Mayrow network was based there, allegedly sending to Iran U.S.-origin components used to make the improvised explosive devices killing our soldiers in Iraq and Afghanistan. Iran continues to import large quantities of goods through Dubai’s revolving door, posing a grave security risk and circumventing sanctions efforts. Congress must continue to demand real export control improvements by the UAE, and should attach conditions to that effect to any agreement for nuclear cooperation. At the same time, we need broader tools to motivate and punish countries which do not adopt effective export controls as required by United Nations Security Council resolution 1540. Congress should legislate the “destinations of diversion concern” concept, which would impose greater controls on trade with such diversion facilitators.

Oversight remains necessary

The challenges I’ve discussed – the flawed VEU program, weak Entity List, and others – have been exposed and publicized through the work of this Subcommittee and others. Congress should expand and systematize this oversight, and enlist other investigators to help it. For example, the GAO should be tasked with reviewing export records and BIS licensing decisions every year. Such reviews generate valuable data for checking whether the system is protecting our security.

Congress should also use help from the relevant Inspectors General. Until recently, the Inspectors General of the Departments of Commerce, Defense, Energy, and State, in consultation with the Director of Central Intelligence and the Director of the Federal Bureau of Investigation, were required by statute to assess whether export controls and counterintelligence measures are adequate for preventing the acquisition of sensitive U.S. technology and technical information by countries and entities of concern. The Inspector General at the Department of Homeland Security also participated in these reviews. The Inspectors General identified numerous shortcomings, prompting improvements. These reviews should be re-instituted and made permanent.

Newest Designation Reinforces Concerns About Validated End-User Program

Aviza Technology China is the newest Chinese company granted Validated End-User (VEU) status by the U.S. Commerce Department.  This status means that the company is approved to receive certain sensitive controlled commodities from the United States without individual export licenses.[1]  After a “rigorous national security review,”[2] Aviza can receive these items at five specified “eligible destinations” in China.[3]  But the attached documents show that one of these approved locations may in fact be owned by a company penalized by sanctions that the United States imposed in 2006 for proliferation to Iran and/or Syria.  Other companies in China that became the first VEUs in October 2007[4] posed a similar problem.  A Wisconsin Project analysis showed that two of those five companies were linked to proliferators, to violators of U.S. export controls, and to China’s military production complex.[5]  This repeated failure of the selection process to choose “trusted” customers and locations continues to cast doubt on the wisdom of the VEU program itself.

One of the approved destinations for Aviza is “Beijing Bonded: CIES, Electronics Building, A23, Fuxing Road, Beijing, China 100036.”[6]  This is a warehouse owned by CIES,[7] until recently a wholly-owned subsidiary company of China National Electronics Import and Export Corporation (CEIEC).[8]  And CEIEC is a state-owned firm that was under State Department sanctions (along with all of its subsidiaries) from December 2006 until December 2008.[9]  The Wisconsin Project’s original VEU analysis discussed at length the diversion and proliferation risks posed by CEIEC, including with respect to nuclear-usable pressure transducers (ECCN 2B230)[10] – which are now eligible for shipment to the CIES warehouse without prior U.S. government scrutiny.[11] Responding to queries from U.S. customers after the sanctions were imposed, CIES claimed 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).”[12]  CIES claimed that after this change it was no longer a subsidiary of CEIEC, and had “no relationship” with its former parent company, so the U.S. sanctions “should not include” it.[13]  However, the Wisconsin Project has discovered evidence that suggests a continuing relationship between the “eligible destination” warehouse owner CIES and the proliferator CEIEC.

At least 70 shipments from “CEIEC International Electronics Service Company” arrived in the United States in 2008.  And such shipments continued to arrive in 2009, even though a company with that name is no longer supposed to exist.[14]  In fact, a search of bills of lading shows that as many shipments arrived in 2008 under the name of the supposedly-defunct predecessor company (“CEIEC International Electronics Service Company”) as did bearing the name of the successor company (“China International Electronics Service Co., Ltd.”).[15]  And all of these shipments give the same company address, “Electronics Building, A23, Fuxing Road, Beijing, China 100036” — the address that has now been declared an approved destination by the Commerce Department.[16]  It appears that CIES continues to identify itself either as part of CEIEC or as related to it in some way.

Furthermore, the approval by the Commerce Department of this specific address is also problematic because the address is used by the recently sanctioned CEIEC itself,[17] including its defense electronics department.[18]  The address, therefore, simultaneously qualifies as a “red flag” (for military and proliferation concerns) and a “trusted” location.  This could lead to confusion among U.S. exporters.

These findings pose serious questions that the Commerce Department must answer:

  • Who controls CIES, the owner of the “eligible destination” warehouse? CIES claims that it is now owned privately by nine shareholders, rather than by CEIEC.[19]  But who are these shareholders, and do they have connections to CEIEC?  If not, why does CIES continue to use its previous name (including “CEIEC”) on bills of lading?
  • How can this warehouse be considered a safe destination, free from diversion risk, if it is in the building where CEIEC and its defense electronics department have their headquarters?
  • How will the Commerce Department ensure that the “eligible destination” warehouse is not accessible to individuals (current or former employees of CEIEC and its subsidiaries) who were involved in the proliferation practices for which CEIEC was sanctioned, or may pose a risk of such involvement in the future?

To read the complete report, click here:  Newest Designation Reinforces Concerns About Validated End-User Program

Footnotes:

[1] “New BIS Program Changes Export Rules on Targeted Products for Select Companies in China,” U.S. Department of Commerce, Bureau of Industry and Security, http://www.bis.doc.gov/news/2007/china10182007.htm, accessed on June 8, 2009.

[2] “BIS Announces Modifications, Additions, to Validated End-User Program,” Department of Commerce, Bureau of Industry and Security, April 29, 2009, available at http://www.bis.doc.gov/news/2009/bis_press04292009.htm, accessed on June 8, 2009.

[3] “Additions and Revision to the List of Approved End-Users and Respective Eligible Items for the People’s Republic of China (PRC) Under Authorization Validated End-User (VEU),” Department of Commerce, Bureau of Industry and Security, Federal Register Vol. 74, No. 81, pp. 19382-19385, April 29, 2009 (attached).

[4] “New BIS Program Changes Export Rules on Targeted Products for Select Companies in China,” U.S. Department of Commerce, Bureau of Industry and Security, http://www.bis.doc.gov/news/2007/china10182007.htm, accessed on June 8, 2009.

[5] Wisconsin Project on Nuclear Arms Control, “In China We Trust?” available at http://www.wisconsinproject.org/pubs/reports/2007/inchinawetrust.pdf.

[6] “Additions and Revision to the List of Approved End-Users and Respective Eligible Items for the People’s Republic of China (PRC) Under Authorization Validated End-User (VEU),” Department of Commerce, Bureau of Industry and Security, Federal Register Vol. 74, No. 81, pp. 19382-19385, April 29, 2009 (attached).

[7] Company Introduction, China International Electronics Service Co., Ltd. World Wide Web site,

http://www.cies.com.cn/index-e.htm, accessed on May 5, 2009.

[8] “Explanations on the Sanctions by US Government to CEIEC,” China International Electronics Service Co., Ltd. World Wide Web site, http://www.cies.com.cn/zysm.htm, accessed on May 22, 2009 (attached).

[9] “Imposition of Nonproliferation Measures Against Foreign Persons, Including a Ban on U.S. Government Procurement,” Department of State, Bureau of International Security and Nonproliferation, Federal Register Vol. 72, No. 3, p. 606, January 5, 2007 (attached).

[10] Wisconsin Project on Nuclear Arms Control, “In China We Trust?” pp. 7-8, available at http://www.wisconsinproject.org/pubs/reports/2007/inchinawetrust.pdf.

[11] “Additions and Revision to the List of Approved End-Users and Respective Eligible Items for the People’s Republic of China (PRC) Under Authorization Validated End-User (VEU),” Department of Commerce, Bureau of Industry and Security, Federal Register Vol. 74, No. 81, pp. 19382-19385, April 29, 2009 (attached).  Also eligible is equipment for the manufacturing of semiconductor devices or materials: anisotropic plasma dry etching equipment (ECCN 3B001.c.1.a) and automatic loading multi-chamber central wafer handling systems (ECCN 3B001.e).

[12] “Explanations on the Sanctions by US Government to CEIEC,” China International Electronics Service Co., Ltd. World Wide Web site, http://www.cies.com.cn/zysm.htm, accessed on May 22, 2009.

[13] “Explanations on the Sanctions by US Government to CEIEC,” China International Electronics Service Co., Ltd. World Wide Web site, http://www.cies.com.cn/zysm.htm, accessed on May 22, 2009.

[14] See attached sampling of bills of lading from 2007-2009.

[15] This comparison is based on bill of lading searches for “CEIEC International Electronics Service” and “China International Electronics Service.”

[16] “Additions and Revision to the List of Approved End-Users and Respective Eligible Items for the People’s Republic of China (PRC) Under Authorization Validated End-User (VEU),” Department of Commerce, Bureau of Industry and Security, Federal Register Vol. 74, No. 81, pp. 19382-19385, April 29, 2009; see also attached bills of lading.

[17] Contact: World Trade, China National Electronics Import and Export Corporation World Wide Web site, http://www.ceiec.com.cn/english/type/dept.aspx?code=07004, accessed on June 8, 2009; Contact: System & Equipment, China National Electronics Import and Export Corporation World Wide Web site, http://www.ceiec.com.cn/english/type/dept.aspx?code=03003, accessed on June 8, 2009.

[18] Contact List, Defence Electronics Department of CEIEC, China National Electronics Import & Export Corporation World Wide Web site, http://www.ceiec.com.cn/english/type/dept/aspx?code=02003, accessed on May 20, 2009.

[19] “Explanations on the Sanctions by US Government to CEIEC,” China International Electronics Service Co., Ltd. World Wide Web site, http://www.cies.com.cn/zysm.htm, accessed on May 22, 2009.

Twenty Five Years of Transshipments Through the United Arab Emirates

During the past quarter century, the United Arab Emirates have enjoyed a unique position in the world: they, more than any other country, have helped illicit traders mask the true destination of cargo. And unfortunately for us all, much of that cargo has helped build weapons of mass destruction. By routing secret shipments through the Emirates, India evaded international controls on its plutonium-producing reactors, Libya got centrifuges for enriching uranium, and both Iran and Iraq acquired key components for their nuclear and missile efforts. The Emirates also served as headquarters for history’s largest nuclear smuggling ring—the one operated by Pakistani scientist A. Q. Khan. It supplied the means to make nuclear weapon fuel to Iran, Libya and North Korea—all at the same time—and even threw in a tested nuclear weapon design.

Listed below are the more important shipments that have come to light. They are surely but a small fraction of the total. What they reveal is that the Emirates are not a safe destination for sensitive goods. For twenty five years, what has gone in the front door has gone out through more back doors than one can count. For that reason, the United States should not begin nuclear trade with the Emirates—as is now being proposed—until there is solid proof that the Emirates have changed their ways. So far, such proof is entirely lacking.

Dangerous transshipments through the U.A.E.: 1982 to 2009

1982: A West German sends seventy tons of heavy water (a key nuclear reactor component) through Dubai (one of the Emirates) from China; sixty tons are forwarded to India, which is developing nuclear weapons, and ten to Argentina, which is interested in doing so.

1983: The same West German sends fifteen tons of heavy water from Norway and 6.7 tons from the Soviet Union through the U.A.E. to India.

1985: According to documents from German customs, employees of a German firm manufacture uranium enrichment components that are sent to Dubai. French investigators allege the final recipient is Pakistan.

1985 – 1986: The West German sends 6.8 tons of Soviet heavy water through the U.A.E. to India that could have been used to start the Dhruva reactor, devoted to making plutonium for atomic bombs.

March 1989: A firm owned by the Indian government ships through Dubai to Iran sixty tons of thionyl chloride, which can be used to manufacture mustard gas and nerve agents.

May – June 1989: One hundred metric tons of centrifuge-grade maraging steel are reportedly delivered from Belgium through Dubai to Iraq.

1990: A Greek intermediary claiming to represent A.Q. Khan offers Iraq an atomic bomb design, promising that any required materials could be shipped via Dubai.

1994 – 1995: A Sri Lankan based in Dubai organizes the transshipment of two containers of centrifuge components from Dubai to Iran, on behalf of A.Q. Khan, for $3 million.

1996: The German government warns its exporters that Iranian companies charged with procuring weapons are active in Dubai.

June 1996: A Dubai company that ships impregnated alumina, which can be used in the manufacture of nerve gas, to Iran is identified in a U.S. court.

1997 – 1998: A U.S. company illegally exports two STX gas monitors via the U.A.E. to Iran. The monitors can be used in chemical and biological weapons production.

1998: According to the U.S. Department of Commerce, a Dubai company transfers U.S.-origin ferrography laboratory equipment to Iran without authorization.

March 1998: According to the U.S. government’s Iraq Survey Group (I.S.G.), the Iraqi Intelligence Service is using bribes to circumvent customs inspections in Dubai.

September 1998 – February 2001: An Indian company allegedly sends ten shipments of materials used in the manufacture of rocket propellant and missiles to Dubai and Jordan without the required export license. Indian court documents state that the consignments “appear to have been diverted to Iraq for assisting their weapon building programme.”

November 1998 – February 2000: According to a U.S. indictment, a Dubai company tries to export U.S. computer items to the Iranian Ministry of Defense, which is involved in missile development.

2001: U.A.E. companies act as intermediaries in the partial delivery of fiber-optic and military communications contracts from South Korea to Iraq, according to the I.S.G.

September 2001: According to the U.S. Department of Justice, a U.A.E. company purchases $16,000 of military radar components from the U.S. and transships them to Pakistan.

September 2001 – March 2003: A U.A.E. company orders super servers, motherboards, and computer chassis from the U.S. and forwards them to Iran.

October 2001: A U.A.E. company facilitates trade in ballistic missile-related goods from China to Iraq, according to the I.S.G.

December 2001 – March 2002: According to the U.S. Commerce Department, a company in Dubai exports controlled telecommunications devices from the U.S. to Iran via the U.A.E.

February 2002 – November 2008: According to a U.S. indictment, two Iranians residing in the U.S. export laboratory equipment and fuel cell systems to Iran via the U.A.E.

May 2002: The German government warns its exporters that since 1998 Iraq has been procuring items through Dubai.

2003: According to the U.S. Department of Justice, a U.S. company illegally exports to the U.A.E. restricted graphite products that can be used in nuclear reactors and nose cones of ballistic missiles; the products are then forwarded to Pakistan.

May 2003 – February 2004: According to a U.S. indictment, a U.A.E. company exports a U.S. satellite communications system to Iran without the required license.

June 2003: Trade with Iran through Dubai’s ports is reported to have been twelve billion dirhams in 2001, an increase from 4.3 billion in 1997.

October 2003: The U.A.E.’s Director of Customs refuses a U.S. request to detain an illicit shipment of sixty-six U.S. triggered spark gaps (which can serve as nuclear weapon triggers) through Dubai to Pakistan.

October 2003: Five containers of centrifuge components, shipped through Dubai, are seized en route to Libya. The items are part of four shipments to Dubai between 2002 and 2003.

October 2003: Two weeks after the seizure of the centrifuge components, a Sri Lankan arranges the transshipment to Libya, via Dubai, of an electrical cabinet and power supplier-voltage regulator on behalf of an associate of A.Q. Khan.

December 2003: According to a U.S. indictment, a Dubai company attempts to export U.S. pressure sensors to Iran.

January 2004 – November 2006: According to a U.S. indictment, two managers of a U.A.E.-based company import electronic components that could be used in improvised explosive devices (IEDs) from the U.S. to the U.A.E., and then forward the components to Iran.

January 2004 – May 2008: According to a U.S. indictment, an Iranian residing in the United States and ten other defendants export thirteen types of military aircraft parts to Iran via the U.A.E.

September 2004: The I.S.G. lists twenty U.A.E. firms that are suspected of having acted as front companies for Saddam Hussein’s Iraq, and says that the U.A.E. was a transit location for prohibited goods. The I.S.G. also concludes that the U.A.E. and Iran were the most frequent destinations for Iraqi smuggled oil.

September 2004: According to U.S. Immigration and Customs Enforcement, an American attempts to ship over one hundred U.S. pressure sensors to the Iran via the U.A.E.

2005: More than 300 Iranian companies are known to have operated in Dubai’s Jebel Ali Free Zone.

July 2005: The German government warns its exporters that trading companies in Dubai are being used to arrange and finance proliferation activities, especially with Iran.

Summer 2005 – Spring 2007: According to a U.S. indictment, an Iranian based in Dubai causes military aviation parts to be exported from the U.S. to the U.A.E., Thailand and other locations for transshipment to Iran.

August 2006 – February 2007: According to a U.S. indictment, an Irish company ships thirty-two U.S. origin aircraft bolts to Dubai with invoices indicating that the final destination of the bolts is Iran.

October 2006 – June 2007: According to a U.S. indictment, two naturalized U.S. citizens procure U.S.-made military aircraft parts and cause them to be exported to a company in Dubai and forwarded to Iran.

August 2007: The U.A.E. announces a law for the control of exports and imports of strategic goods, including military equipment, chemical and biological materials, and dual-use items.

2007 – 2008: The U.S. Department of Commerce and the U.S. Department of Justice pursue approximately twenty export violation cases involving transshipment of controlled items from the U.A.E. to Iran, Pakistan and India.

April 2009: Canadian authorities charge a Toronto resident with attempting to ship ten U.S. pressure transducers, which can be used for uranium enrichment, from the U.S. to Iran via Dubai.

Syria Nuclear Milestones – 1963-2009

1963: Syria joins the International Atomic Energy Agency (IAEA).

1968: Syria signs the Nuclear Nonproliferation Treaty (NPT).

Mid- 1970s: The Atomic Energy Commission of Syria (ACES) is established.

1979: The IAEA, AECS and Syria’s Ministry of Electricity begin a nuclear power program feasibility and planning study.

1982: The IAEA and AECS establish a nuclear analytical laboratory (completed in 1990). The IAEA provides systems for atomic absorption spectrometry, X-ray fluorescence analysis, gas and liquid chromatography, fluorimetry and low-level alpha, beta and gamma counting. Five AECS members are trained to use the laboratory.

1982: AECS is a co-founder of the Arab Atomic Energy Agency (AAEA), aimed at developing and transferring peaceful uses of atomic energy in Arab countries.

1984: The IAEA and AECS establish a nuclear training laboratory (completed in 1987). The IAEA provides oscilloscopes, electronic tools and components, a scintillation detector, X-ray and GM counters, neutron sources and chemicals.

1985: Syria negotiates with the Soviet Union for transfer of a 10 MW nuclear research reactor, but negotiations eventually fall through.

1986 – 1992: The IAEA provides Syria with a micro-plant facility to test the feasibility of recovering uranium “yellow cake” from phosphoric acid produced at the Homs fertilizer plant. Syria’s nuclear power program is shelved for financial and contractual reasons.

1990: Argentina reportedly comes close to selling Syria a 10 MW thermal pool-type reactor for isotope production. The deal would have included a radiological protection center and a hot cell for radioisotope fabrication.

1991 – 1998: The IAEA assists AECS with the purchase and installation of a Chinese 30 KW miniature neutron source reactor in the Der Al-Hadjar Nuclear Research Center.

1991: India’s Atomic Energy Commission reportedly offers to sell Syria a light water research reactor.

February 1992: Syria signs an NPT safeguards agreement with the IAEA, which allows the IAEA to verify Syria’s declarations of its nuclear material and nuclear-related activity.

1995: Syria approaches Argentina for a 3 or 5 MW nuclear reactor for medical purposes, but Argentina declines the sale due to international pressure.

1996 – 2001: The IAEA helps Syria undertake a pilot plant project to remove uranium from Triple Super Phosphate produced at the Homs fertilizer plant.

March 1996: The Miniature Neutron Source Reactor located at the Der Al-Hadjar Nuclear Research Center goes critical.

1997: According to U.S. intelligence, nuclear cooperation probably begins between North Korea and Syria.

1997 – 2007: The IAEA helps Syria build a cyclotron in Damascus. Equipment includes a 30 MV cyclotron machine purchased from Ion Beam Applications in Belgium, a high performance liquid chromatography unit, a gas chromatography unit, a polarograph, a gamma spectrometer and dose calibrator, two lead windows, and two hot cell manipulators. Also included are hot cells and clean rooms.

1997: The IAEA begins to assistSyria with the purchase of an ion beam accelerator and equipment from High Voltage Engineering Europe BV in the Netherlands.

February – July 1998: Russia agrees to provide Syria a 25 MW light-water research reactor; the project is abandoned due to lack of finances.

February 1999: The pilot plant to remove uranium from Triple Super Phosphate is commissioned.

April – August 2001: According to the IAEA, Syria begins to build a secret nuclear reactor at the Dair Alzour site, also referred to as Al Kibar, along the Euphrates River in eastern Syria.

2001: A. Q. Khan reportedly meets with Syrian nuclear officials in Iran to help Syria develop nuclear weapons.

2002: North Korean officials seek to procure a gas-cooled reactor component, which U.S. intelligence believes is intended for Syria.

2002: The cyclotron facility at the Dubaya Center in Damascus is operational.

2004: U.S. intelligence reports that Syria has nuclear research facilities at Der Al-Hadjar and Dubaya.

January 2004: Pakistani investigators say that A. Q. Khan offered technology and hardware to Syria, according to the Pakistani press.

May 2004: The U.S. Government issues Executive Order 13338 prohibiting the exportation or reexportation of U.S. Munitions List and Commerce Control List items to Syria and freezing assets under U.S. jurisdiction of entities determined to contribute to Syria’s pursuit of nuclear weapons.

September 2005: The ion beam accelerator at AECS’ Physics Department is commissioned.

November 2005: The U.S. Government amends the Iran Nonproliferation Act of 2000 to become the Iran and Syria Nonproliferation Act, under which companies can be punished for helping Syra build weapons of mass destruction.

2006: According to U.S. intelligence, North Korea transferred cargo to the Dair Alzour area, probably to the reactor site.

September 2007: Israel destroys a nearly complete but non-operational Syrian nuclear reactor in Dair Alzour.

September – October 2007: Syria commences large scale clearing and leveling of the Dair Alzour site.

October 2007: Syrian President Bashar al-Assad claims that Israel hit an unoccupied military compound in its September airstrike.

April 2008: U.S. intelligence asserts that the site near Dair Alzour housed a gas-cooled graphite-moderated reactor, similar to North Korea’s Yongbyon reactor, that would have been capable of producing plutonium for nuclear weapons.

June 2008: The IAEA inspects and takes environmental samples of the Dair Alzour site.

October 2008: Syrian official Fayssal Mekdad declares that three additional sites the IAEA wishes to investigate in connection to the Dair Alzour site are off limits because they are restricted military areas.

November 2008: The results of environmental samples taken by the IAEA at Dair Alzour reveal man-made uranium particles produced through chemical processing. The IAEA also finds the containment structure, size, and water pumping capacity of the bombed structure to have been sufficient for a nuclear reactor.

November 2008: The IAEA approves a feasibility and site selection study for a Syrian nuclear power plant. The study will begin in 2009.

February 2009: Further analysis by the IAEA of environmental samples from Dair Alzour reveals additional uranium particles not declared by Syria’s nuclear material inventory. The findings are inconsistent with Syrian claims that the particles originated in Israeli missiles used to destroy Dair Alzour.

2009: The IAEA plans to help Syria establish a specialized dosimetry laboratory and to enhance the analytical capabilities of the ion beam accelerator in the AECS’ Physics Department.

Chinese Exports to Iran

Today, prosecutors in New York revealed that during the past three years, Chinese firms have sold Iran materials useful for making nuclear weapons and long-range missiles. The revelations were the product of an extensive investigation into suspicious transactions that used New York banks and Chinese front companies, and that were carried out by the Chinese firm Limmt (Dalian) Metallurgy and Minerals Co., Ltd. The Wisconsin Project on Nuclear Arms Control is proud to have aided in the investigation.

Although it is uncertain what Iran actually produced with the materials it imported, Iran’s active nuclear and missile programs make the sales alarming. Many of the materials were on the list of sensitive nuclear and missile items controlled for export internationally.

According to the indictment released by the prosecutors, the following items were among those exported:

ITEMS EXPORTED

Tungsten
This material is used to make missile nose cones, missile nozzle throat inserts, and missile jet vanes (which steer the missile engine exhaust and thus guide the missile). The material is controlled for export as a powder, which can be formed into missile parts by pouring the powder into molds and sintering it.

Graphite cylinders for EDM
Liaoning Industry and Trade Co. Ltd. (a front company for Limmt) sold Iran graphite cylinders stated to be for electrical discharge machines. These machines are controlled for export because they are capable of making, with high accuracy, parts with complex forms. Such parts include explosive, hemispherical components for nuclear weapons, end caps for gas centrifuges used to enrich uranium to nuclear weapon grade or reactor grade, and crucibles for casting liquid uranium or plutonium for nuclear weapon cores. The buyer in Iran was Aban Commercial and Industrial Company.

Graphite is controlled for export as a material if it meets certain specifications that make it suitable for being manufactured into rocket nozzles and re-entry vehicle nose tips. The graphite exported to Iran met those specifications.

High-strength aluminum
Aban also ordered high-strength aluminum from Liaoning. The aluminum was of a strength sufficient to make components for gas centrifuges that enrich uranium to nuclear weapon grade or reactor grade, although considerable machining would be required to make such components. The aluminum was not controlled for export as a nuclear item because it was not in the form of tubes or cylinders. The aluminum was, however, strong enough to be on the control list of military items.

Maraging steel
SC (Dalian) Industry & Trade Co. sold Iran 25 tons of maraging steel that was apparently controlled for export for nuclear reasons. Because of its high tensile strength, maraging steel is one of the few materials strong enough to be used to make gas centrifuge parts. Gas centrifuges are, as stated above, used to enrich uranium. The buyer was the Amin Industrial Complex, which has two addresses, a telephone number, and a fax number identical to those of Khorasan Metallurgy, an Iranian firm that, according to the United Nations, produces centrifuge parts. Khorasan is linked to Iran’s Ministry of Defense and has been sanctioned (punished) by both the European Union and the United Nations.

Maraging steel can also be used to make motor cases for solid-fueled rockets, rocket propellant tanks, and rocket interstages.

COMPANIES NAMED

In addition to describing materials, the indictment contained information about Iranian companies. Three of the companies mentioned are subsidiaries of the Ammunition Industries Group (AMIG), an entity affiliated with Iran’s Ministry of Defense. AMIG is also the largest industrial group of Iran’s Defense Industries Organization (DIO). According to the United Nations, some DIO subordinates have been involved in component manufacturing for Iran’s centrifuge program. As stated above, one of the entities listed has the same contact information as Khorasan Metallurgy, including two addresses, one telephone number and one fax number.

Shahid Sayyade Shirazi Industries
This company is a subsidiary of the Ammunition Industries Group (AMIG), which is the largest industrial group of Iran’s Defense Industries Organization (DIO) and affiliated with the Ministry of Defense. Both DIO and AMIG (along with entities they own or control, or those acting on their behalf or at their direction) have been sanctioned by the U.N. Security Council, the European Union and the United States for their links to proliferation. Some DIO subordinates have been “involved in Iran’s centrifuge program making components,” and in Iran’s missile program, according to the U.N. Security Council. Composite rotors for the P-2 centrifuge have been manufactured in a workshop situated on a DIO site, and several DIO workshops help produce centrifuge components. This company also “produces large caliber items and their cartridge cases,” according to the AMIG web site. Its parent AMIG manufactures ammunition, mortar bombs, pyrotechnics, anti-tank and sea mines, hand grenades and detonators, and DIO produces an array of defense equipment.

Yazd Metallurgy Industries
This company too is a subsidiary of the Ammunition Industries Group (AMIG).

Khorasan Metallurgy
This company has been sanctioned by the U.N. Security Council and the European Union for links to proliferation, as stated above. Khorasan is a subsidiary of the Ammunition Industries Group (AMIG), and is involved in the production of centrifuge components, according to the United Nations. It also manufactures cutting tools and products such as drills, milling cutters, taps, reamers, and compound tools.

Amin Industrial Complex
As stated above, this company shares a fax number and a P.O. Box with Khorasan Metallurgy Industries, as well as a street address and telephone number.

INDICTMENT

LIMMT Dalian Metallurgy & Minerals Co.
The prosecutors indicted one Chinese entity, LIMMT Dalian Metallurgy & Minerals Co. This company had already been sanctioned by the United States in February 2009 for engaging in proliferation activities, and was added to the Specially Designated National list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control on June 13, 2006. According to the Treasury Department, during the year prior to its designation the company supplied, or attempted to supply, “controlled items” to “Iran’s military and missile organizations.” This company was also listed by the Japanese government in 2007 as an entity of concern for proliferation relating to missiles and it was sanctioned by the United States in 2004 and 2005 under the Iran Nonproliferation Act of 2000. LIMMT is also known as Dalian Sunny Industries, LIMMT (Dalian FTZ) Economic and Trade Organization, LIMMT Economic and Trade Company Ltd., and LIMMT (Dalian FTZ) Minmetals and Metallurgy Co., Ltd.

Theft of Nuclear Material: Reducing the Risk

An interview with William H. Tobey

On January 14, 2009, the Wisconsin Project spoke with William H. Tobey, Deputy Administrator for Defense Nuclear Nonproliferation at the National Nuclear Security Administration, U.S. Department of Energy. Mr. Tobey reviewed the principal nonproliferation accomplishments of his office, which included securing nuclear material in Russia, converting research reactors fueled by highly enriched uranium, and training programs aimed at improving border and export control security. He also described challenges in these areas that deserve the attention of the new administration. He is now a senior fellow at Harvard’s Kennedy School Belfer Center for Science and International Affairs.

The following is an edited transcript of our conversation.

Wisconsin Project (WP): Your office has played a key role in implementing the administration’s nonproliferation policy. What, in your view, have been the greatest achievements and, looking forward, what remains to be done?

William H. Tobey (WT): I have the advantage of working with a great team of people. We have made enormous progress over the last several years. First, the Bratislava Initiative on nuclear material security was completed on time at the end of 2008. That, in large measure, finishes the work of securing nuclear weapons and nuclear weapons material in Russia. The Department of Energy worked at 123 sites in Russia, and the Defense Department worked at 25 sites. So between the two agencies, almost 150 weapon sites in Russia have been secured because of bilateral cooperation between the United States and Russia.

On my last trip there, a senior Russian official told me that, in his view, we advanced the completion of nuclear material security in Russia by 25 years. That’s a tremendous change in the state of the world from the early to mid-1990s.

WP: When you say secured, you mean new security systems have been installed?

WT: Well, it’s a comprehensive approach. Physical security, starting at the perimeter, with fences, cameras, guard posts, guard stations, and metal and special nuclear material detectors; but also training programs, including personnel security programs, reliability programs, etc.

WP: And these sites include nuclear weapon sites? How do you get around the sensitivity of knowing where the weapons are and how many there are and so forth?

WT: Yes, nuclear weapon sites. We don’t have insight into exactly where the weapons are and how many might be in one spot, but we do know which sites need to be secured. We hire Russian contractors. And we’re permitted to visit the sites before the security upgrade, at a midway point, and after the upgrade is complete.

WP: Do we know where all the highly enriched uranium is in Russia?

WT: We have worked at sites that contain highly enriched uranium, but Russia is not obligated to tell us exactly where within those sites the material is stored, or the quantity of material.

WP: What about highly enriched uranium stocked at civilian sites, like research reactors?

WT: There are research reactor sites in Russia that use highly enriched uranium; they remain a concern. These sites have not been part of our program. We have talked to Russia about converting these reactors to operate on low-enriched uranium.

WP: So, is fresh fuel sitting at those reactors? Is it secured?

WT: I would imagine that there is fresh fuel at those reactors, yes, but I can’t speak to security at the reactors. This is a Russian issue that we’re attempting to talk to them about. But so far, we haven’t worked on any reactor conversions within Russia.

WP: Is this high on your list of remaining things to worry about?

WT: It is. Not because these reactors are in Russia, but because as a general principle we would like to minimize the use of highly enriched uranium around the world. We’re converting reactors in the United States as well. But Russia does have the greatest number of unconverted reactors.

Russia has also been part of a program to accelerate the conversion of research reactors in other countries from the use of highly enriched uranium to low enriched uranium, and to secure storage of fresh and spent fuel, either in Russia or in the United States. To date, we’ve converted or closed a total of 62 reactors in 32 countries. Part of that work has been under the Bratislava Initiative, in cooperation with Russia. In fact, we’ve been able to accelerate this work through the Initiative. Since the Bratislava Initiative, we’ve converted or closed a total of 13 reactors. In a prior, similar period, we were only able to convert one reactor.

WP: Worldwide, how many research reactors are left to be converted?

WT: There was an original pool of about 129 civil nuclear research reactors using highly enriched uranium. We’ve converted 62 in various countries around the world, other than Russia. Some have been U.S.-supplied reactors and some have been Russian reactors. Through this process, we’ve removed to secure storage about two tons of fresh and spent fuel from the reactors that we’ve converted.

WP: How many reactors are you in the process of converting now?

WT: We’ve been doing about seven or eight per year lately.

WP: Would you say you’re adequately funded for this work?

WT: Yes, we’ve gotten a tremendous increase in funding and that’s enabled us to increase the number of conversions. There are limiting factors beyond simple funding, because it takes some diplomacy to get this work started, and it takes some planning at the reactors. It’s a fairly large logistical operation. For example, we did a reactor conversion in Hungary which required moving the fuel through Slovenia, shipping it around to St. Petersburg, and then transporting it by train to a final site in Russia. So the limiting factors at this point are not funding.

WP: How do you prioritize your work?

WT: Our first priority has been to secure weapons and weapons-usable material. The good news is that, within Russia, which had the great bulk of such work, our job is virtually done. Priority was given to nuclear weapons and nuclear weapons material at vulnerable sites. In fact we endured some criticism before I got here because we had been allegedly slow in securing larger quantities of material that, in our view, was not as vulnerable as material stored at smaller sites. So, if 250 kg of highly enriched uranium, a quantity that could be used in a weapon, was very vulnerable, whereas two tons was less vulnerable, we chose to go after the most vulnerable material first. This meant that in some cases, we secured smaller sites first. And because it can take almost as much time to secure a small site as a large one — there being certain fixed costs in time and money for security upgrades — our progress may have looked slow, when measured by the amount of material vs. the number of sites that had been secured.

WP: Presumably this initiative has required a lot of cooperation with your Russian counterparts. It sounds like an example of a way in which the United States and Russia are working closely on an important, and sensitive, international security issue.

WT: It’s a bright spot in U.S.-Russian relations. We’ve worked very closely and productively together on nuclear materials security. And it’s flowed, I think, into other areas. For example, the close cooperation we had with Russia on nuclear material security allowed us to cooperate in launching the Global Initiative to Combat Nuclear Terrorism.

WP: How have other governments, aside from Russia, responded to this initiative?

WT: The Initiative is intended to bring to bear the resources of other countries across the whole spectrum of measures to defeat the threat of nuclear terrorism. It has now been joined by over 70 countries. And I would note that at the Global Initiative to Combat Terrorism meeting in Astana, Kazakhstan in the summer of 2007, agreement was reached to minimize the use of highly enriched uranium.

WP: When you think about securing a hypothetical quantity of bomb-usable material, do you make a judgment about who might steal, smuggle or take it by force?

WT: I don’t think you can separate terrorists and nonproliferation issues. We’re worried about the material falling into the hands of terrorists. But we’re also worried about it falling into the hands of nation states that would pursue illicit weapon programs. The threat from both terrorists and nation states are the reasons why we’re working on improving site security and converting reactors. For reactors, our goal is to convert them and to remove the material, to absolutely secure storage, either in Russia or in the United States.

WP: But for reactors that haven’t been converted, that have some fresh fuel, and probably some spent fuel, do your recommendations for security depend on the threat you’re imagining?

WT: Yes, and it takes into account our overall assessment of the threat in a particular country.

WP: Do you think the greatest threat is from forcible removal or corruption — smuggling and sale by someone on the inside?

WT: I think it depends on the type of facility. If you’re talking about research reactors, it’s probably less likely that it would be an insider threat. But if you’re talking about other, larger, facilities where weapons-usable material is handled, an insider threat would probably be more acute. We know from experience that bulk material is more vulnerable to theft by insiders.

WP: How vulnerable is a lightly-guarded research reactor with a few bombs worth of material to forcible attack by a well-armed group?

WT: There are some real difficulties in this scenario. First, it’s not easy to remove the fuel from the reactor. You have to know how to remove the fuel. Stored fresh fuel is, in some ways, easier to secure because there are physical protection measures you can take that would be more difficult with respect to fuel in the reactor itself. And we do have programs for securing the fresh fuel at reactors that haven’t been converted.

WP: What is the chance that we’d know about it if enough highly enriched uranium or plutonium for a few bombs went missing somewhere in the world?

WT: I don’t think we would necessarily know. Sovereign states would control such information, and we cannot compel them to share it. There is a reporting requirement to the International Atomic Energy Agency for such incidents, and many countries do report them. But I don’t think it’s by any means certain. There’s at least a good chance that a government might be reluctant to admit it.

WP: What is the likelihood that we could determine the origin of material that went off in a bomb in the United States, for instance?

WT: We’ve worked reasonably hard, and I think are working harder, at improving our forensic capabilities. At this point, I think there’s an excellent chance that we would be able to determine physical characteristics which would point to the origin of material that went off in a bomb. But these things take time. It’s not something that could be done overnight. Moreover, even if the country of origin of such material is known with certainty, it does not necessarily explain how it came to be in a weapon that detonated. Was it, for example, used directly by a nation state, sold by a nation state to a third party, or stolen by a third party?

WP: Detection of illicit transfers is another aspect of nuclear security. Tell us about your worked with the Megaports initiative.

WT: Sure. As we began to complete our work on materials security at weapons sites in Russia, we realized that we should turn elsewhere. If the first line of defense includes guns, guards and gates at nuclear weapons materials sites, the second line of defense is composed of radiation detectors at border crossings, first within Russia, in order to provide a back-up in case, for example, insiders were successful in smuggling nuclear material. Within Russia, we got agreement in 2006 to accelerate the completion of their border security work and basically to split the cost with the Russians and get it completed by 2011 — six years ahead of their previous schedule. In fact, the one place we’re confident that there are portal monitors in place that could detect nuclear material is on the Russian border with North Korea.

And, beyond Russia, at border crossings around the world, we wanted to deal with this threat regardless of the origin of the material or its destination. We’ve provided radiation detectors at large seaports, border crossings, and airports. There are 19 operational Megaports, (large ports that handle a high volume of shipping containers) with work underway to equip an additional 20. Ultimately, our goal is to equip about 70 ports around the world.

WP: Have any of the ports detected radioactive material?

WT: Yes, it’s not an infrequent occurrence. Most of the Megaport-related alarms have been set off by radioactive scrap. One of our detectors actually was involved in the detection of a small quantity of highly enriched uranium, but it wasn’t a port. It was at a border crossing.

WP: Couldn’t the use of lead shielding prevent the detection of radiation?

WT: Shielding makes detection more difficult, but shielding also imposes costs on would-be smugglers. It’s heavier and it’s susceptible to x-rays. U.S. port security is handled by the Department of Homeland Security. In addition to using radiation detectors, they x-ray containers. If they see a large dark spot in a container full of sneakers, maybe it won’t set off the radiation detector, but it will be noticed in the x-ray. If a container is heavier than it should be, given the declared contents, customs officials may notice. So, we might not detect the radiation from a sphere of HEU in a lead box, but we might detect the lead box.

WP: So what remains to be done on these second line of defense initiatives?

WT: As I said, we’ve completed work at 19 ports. We’ve got work underway at 20. But that only gets us about halfway to our goal. So, we need to continue our work at ports. We also need to continue building on the border crossing work in Russia and elsewhere. We have an active program of cooperation in places like Georgia. We’d like to work more closely with Turkey, as well. Both of those countries are in an area of the world where there’s a history of smuggling.

WP: Another aspect of improving security at border crossings is training the officials who man those crossings.

WT: Yes, using our commodity identification tool, we’ve trained literally thousands of U.S. and foreign inspectors. This type of training is a really important element for second line of defense. In many cases, proliferation-sensitive material is not readily identifiable. Our goal is to put a trained eye on the scene. Since September 11, 2001, we’ve trained 6,000 domestic export enforcement officials and 10,500 foreign officials. And in 2008 alone, we trained over 4,000 officials in 46 countries.

WP: Is there anything you’d like to say to your successor? Any suggestions on what he or she should focus on?

WT: I think we’ve made tremendous progress in securing Russian nuclear material and in research reactor conversions. That work will have to continue. First, we will have to sustain the 2.5 billion dollar investment we’ve already made in Russian nuclear security by making sure that the equipment is maintained and people continue to be trained to operate it properly. Second, we’ll have to continue the reactor conversions, in cooperation with Russia. Third, we need to continue working on the second line of defense. In Russia, we have completed most work at nuclear weapons and nuclear weapons material sites, so we need to expand civil nuclear and radiological security and second line of defense work.

WP: From what you’ve said, I gather that the unfinished work in Russia is primarily at civilian research reactors.

WT: That’s largely it. We’ve got a few more sites in the military programs that we were given to by Russia after the Bratislava Initiative. We tried to complete them during the Initiative, but couldn’t because of short construction seasons, limited numbers of cleared and trained contractors, etc. That work will be completed over the next year or two. But the research reactors are a large issue that will need to be dealt with. Second line of defense work should also be a priority. This means much more than simply providing radiation detectors. It involves training border guards and other officials, active diplomacy to make sure that governments spend time and money to curb smuggling.

I think we also need to continue to make progress on disposing of dangerous nuclear material. We’ve purchased 320 metric tons of Russian highly enriched uranium for use in U.S. civil nuclear reactors. Ten percent of American electricity comes from former Soviet material that had been in weapons once aimed at us or at our allies. Under the highly enriched uranium purchase agreement, we’ve agreed to purchase a total of 500 metric tons.

We also need to continue with a program to dispose of 34 metric tons of U.S. weapons grade plutonium. We are building a fuel fabrication facility at Savannah River South Carolina, which will turn this material into enough civil reactor fuel to power a million households for 50 years.

Finally, we need to continue with international programs of cooperation like the Global Initiative to Combat Nuclear Terrorism, which is really a force multiplier to U.S. efforts to improve efforts in this area. And it provides access, intelligence, and personnel that the United States could never hope to muster on its own.

China Missile Milestones – 1956-2008

1956: China’s Ministry of Defense creates Fifth Academy to develop ballistic missiles.

1964: China tests its first atomic bomb; first flight of the Dong Feng-2 medium-range missile.

1966: Combined test flight and detonation of a nuclear-armed DF-2 missile.

1970: First flight of Long March-1 space rocket; first flight of DF-4 medium-range missile.

1971: First flight of DF intercontinental ballistic missile; DF-3 missile first deployed. Both used as boosters for Long March rockets.

1975: First flight of Long March-2C space rocket.

1983: U.S. intelligence discovers China gave Pakistan tested nuclear bomb design.

1984: First flight of Long March-3 space rocket.

1988: China ships CSS-2 medium-range missiles to Saudi Arabia.

1991: U.S. sanctions China Precision Machinery Import-Export Corporation and China Great Wall Industry Corporation for selling missile technology to Pakistan.

1992: China joins the Nuclear Nonproliferation Treaty (NPT).

1993: China Aerospace Corporation succeeds Ministry of Aerospace Industry to oversee production of space rockets; sanctioned with nine other firms for selling missile technology to Pakistan.

1994: China promises to abide by the Missile Technology Control Regime (MTCR) after the U.S. lifts sanctions.

December 1996: The Washington Times reports that in December 1996 Russia agreed to sell China two Sovremeny-class guided-missile destroyers armed with SS-N-22 high-speed anti-ship missiles.

March 1997: China increases its official military spending by 12.7 percent.

May 1997: The U.S. State Department confirms that China has sold “a number of C-802 ship-based anti-ship cruise missiles” to Iran.

July 1997: The National Air Intelligence Center (NAIC) reports that China is upgrading its medium-range missile force. This includes replacing liquid-fuel CSS-2 missiles with mobile solid-propellant CSS-5 Mod 1 missiles.

September 1997: According to an Israeli intelligence report, China Great Wall Industry Corporation and several Russian firms are helping Iran produce two missile systems based on North Korea’s Nodong missile.

January 1998: China’s Defense Minister, General Chi Haotian, promises U.S. Secretary of Defense William Cohen that China will not sell any more C-801 and C-802 anti-ship cruise missiles to Iran.

April 1998: China rejects an American proposal under which China would become a member of the Missile Technology Control Regime in return for greater access to American space technology.

May 1998: The Central Intelligence Agency (C.I.A.) reportedly believes that China has 13 of its 18 CSS-4 long-range strategic missiles pointed at U.S. cities.

July 1998: China reportedly tests a rocket motor for the DF-31 ballistic missile at the Wuzhai Space and Missile Test Center. The test occurs during President Clinton’s trip to China.

July 1998: It is reported that China produced six new CSS-4 ICBMs in the first four months of 1998 and is expected to build two more.

December 1998: The Washington Times reports that China recently delivered missile technology to Iran, including telemetry equipment that could be used in the testing of medium-range missiles such as Iran’s Shahab-3.

December 1998: A secret Pentagon report concludes that Hughes Space and Communications, without proper authorization, gave China vital technological assistance crucial to the successful launchings of Chinese ballistic missiles and satellites. The report concluded that Hughes provided a “defense service” to China that violated U.S. rules against helping Beijing make better rockets and missiles.

February 1999: The Pentagon reports to Congress that by 2005 China will have an overwhelming advantage over Taiwan due to an intense buildup of ballistic and cruise missile forces.

April 1999: It is reported that China is continuing to transfer missile technology to the Middle East and South Asia, and has provided North Korea with special steel used in missile building.

May 1999: It is reported that U.S. intelligence believes China will deploy the nuclear-capable 5,000 mile DF-31 ballistic missile within the next four years, and that it will be equipped with a warhead whose design uses secret American technology.

August 1999: China tests a new long-range surface-to-surface missile. Several days later, China confirms that the missile tested was a three-stage solid fuel DF-31.

August 1999: It is reported that China signed an $11 million deal to improve Iran’s FL-10 anti-ship cruise missiles. The short-range missiles will be modified so they can be fired from attack helicopters and fast patrol boats.

September 1999: It is reported that China North Industries Corporation (NORINCO) has developed a new long-range artillery system with a range of 360 kilometers, enough to target almost all of Taiwan from mainland China.

October 1999: In a military parade, China displays the DF-31 ICBM for the first time. It is displayed in its launch canister on a transporter-erector-launcher (TEL).

November 1999: U.S. intelligence reports that China is expanding a missile base at Yongan across from Taiwan. It is expected that the base will have a brigade of advanced CSS-7 (M-11) missiles.

December 1999: It is reported that the U.S. Defense Intelligence Agency (DIA) has discovered a second short-range missile base under construction near Taiwan. It is believed that the new base, Xianyou, will contain a force of short-range missiles that will allow China to target all of Taiwan’s major military bases.

February 2000: In a report to Congress, the CIA says Chinese firms have supplied missile-related items, materials and assistance to Iran. The report also states that China has given “extensive” support to Pakistan’s weapon of mass destruction and ballistic missile programs.

April 2000: It is reported that the National Security Agency (NSA) believes the China Precision Machinery Import-Export Company (CPMIEC) has been assisting Libya in the development of the Al-Fatah long-range missile.

May 2000: Sha Zukang, China’s chief arms negotiator, tells the New York Times that the proposed American missile defense system poses a threat to China and could force China to significantly expand its own nuclear forces in response.

July 2000: The New York Times reports that China has increased its shipment of specialty steels, guidance systems and technical expertise to Pakistan since May 1998. It also reports that Chinese experts have been sighted around Pakistan’s newest missile factory.

August 2000: A National Intelligence Estimate (NIE) warns President Clinton that building a national missile defense system for the United States could result in a buildup of China’s nuclear arsenal.

November 2000: The United States waives sanctions against Chinese companies that have made missile-technology transfers to Pakistan and Iran in return for a promise from Beijing that it will promulgate a list of missile-related items the export of which it would ban.

December 2000: The CIA reports that Chinese entities provided Pakistan with missile-related technical assistance during the last half of 2000.

2001: China illicitly receives six X-55 (KH-55) nuclear-capable cruise missiles from Ukraine.

September 2001: China Metallurgical Equipment Corporation (CMEC or MECC) is sanctioned for transferring missile technology to Pakistan’s National Development Complex. Because it is a state-owned company, certain sanctions apply to all missile-related activities of the Chinese government.

June 2002: The CIA reports that Chinese entities are continuing to provide missile-related technical and material assistance to Pakistan.

August 2002: China issues regulations on export control of missiles and missile-related items and technology.

November 2002: China signs agreement to acquire Harpy anti-radiation attack drones from Israel Aircraft Industries.

December 2002: China reportedly test-launches a medium-range DF-21 missile with multiple warheads.

May 2003: China North Industries Corporation (Norinco) is sanctioned by the United States, reportedly for selling missile technology to the Shahid Hemmat Industrial Group (in charge of Iran’s ballistic missile development).

July 2003: China Precision Machinery Import/Export Corporation (CPMIEC) is sanctioned by the United States for “missile technology proliferation activities.”

December 2003: The CIA reports that Chinese entities continue to work with Pakistan and Iran on ballistic missile-related projects. Companies in China also provide “dual-use missile-related items, raw materials, and/or assistance” to Libya and North Korea.

February 2004: Beijing holds its first round of talks with the Missile Technology Control Regime (MTCR) to discuss China’s potential membership.

May 2004: China’s Ministry of Commerce (MOFCOM) announces that it has penalized two Chinese companies for violating the “Regulations of the People’s Republic of China on Export Control of Missiles and Missile-related Items and Technologies.” MOFCOM does not reveal the names of the companies, but reports that one is a trading company based in Jiangsu Province and the other a chemical company based in Shandong Province.

July 2004: China launches the first of its Type 094 nuclear submarines, which are designed to carry intercontinental ballistic missiles.

September 2004: China applies for membership in the Missile Technology Control Regime (MTCR).

September 2004: Xinshidai (China New Era Group) is sanctioned for “missile technology proliferation activities.”

June 2005: China reportedly test-launches a JL-2 submarine-launched ballistic missile (SLBM) from a submarine at sea toward an inland test range.

July 2005: In a report to Congress, the U.S. Department of Defense estimates that China has 650-730 CSS-6 and CSS-7 short-range ballistic missiles and is adding to this arsenal at a rate of 75-120 missiles per year.

2005: Chinese entities continue to support ballistic missile programs in Pakistan, Iran, and North Korea, according to a CIA report.

2006: The DF-31 ICBM achieves “initial threat availability,” according to a U.S. Department of Defense report.

June 2006: The United States designates four Chinese companies that it asserts “supplied Iran’s military and Iranian proliferators with missile-related and dual-use components.” The firms designated are Beijing Alite Technologies Company, Ltd. (ALCO), LIMMT Economic and Trade Company, Ltd., China Great Wall Industry Corporation (CGWIC), and China National Precision Machinery Import/Export Corporation (CPMIEC). G.W. Aerospace, a Torrance, California-based U.S. subsidiary of CGWIC, is also identified.

January 2007: China successfully tests a direct-ascent anti-satellite (ASAT) missile, destroying a Chinese weather satellite.

November 2007: China has deployed between 990 and 1,070 CSS-6 and CSS-7 short-range ballistic missiles to garrisons opposite Taiwan, according to a U.S. Department of Defense estimate.

March 2008: The U.S. Department of Defense reports that China has begun deploying DF-31 and DF-31A intercontinental ballistic missiles to units within its Second Artillery Corps.

March 2008: The U.S. Department of Defense estimates that China has 50-250 DH-10 land attack cruise missiles.