Washington DC- U.S. Senator Bob Casey (D-PA) called on the Department of Commerce to consider sanctions on China for allowing the illicit transshipment of sensitive U.S. goods to Iran, which can be used in that country’s nuclear program. In his letter, Senator Casey also urges designating China as a “Destination of Possible Diversion Concern” under Title III of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA).
“The U.S. and multilateral sanctions against Iran are working, but ensuring that Iran cannot acquire sensitive technology requires all parties to UN sanctions to rigorously and consistently enforce them,” wrote Senator Casey. “China’s failure to address weaknesses in its export controls regime and to enforce UNSC sanctions is a loophole that Iran will continue to utilize, unless we take steps to close it by designating China a ‘Destination of Possible Diversion Concern.’”
Both U.S. bilateral and United Nations sanctions work to prevent Iran from acquiring technology or other material which could have military applications or further their efforts to develop a nuclear weapon. These sanctions have been largely successful at preventing entities from overtly or intentionally dealing with Iran. However, the Iranian regime has found ways to work around them, including by using front companies or diverting shipments through third countries, such as China.
As Senator Casey details in his letter, at least two U.S. court cases demonstrate how Chinese companies and private individuals conspire to violate U.S. export control laws. While the Chinese government may not endorse such transactions, they certainly have not acted sufficiently to prohibit them.
Below is the full text of Senator Casey’s letter:
The Honorable Rebecca Blank
Deputy Secretary of Commerce
U.S. Department of Commerce
Dear Deputy Secretary Blank:
I am writing to express our growing concern about reports that China has allowed shipments of illicit material to Iran, which can be used in that country’s nuclear program. I urge you to consider designating China as a “Destination of Possible Diversion Concern” under Title III of the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA). The U.S. and multilateral sanctions against Iran are working, but ensuring that Iran cannot acquire sensitive technology requires all parties to UN sanctions to rigorously and consistently enforce them.
The Institute for Science and International Security (ISIS) reports, “Iran exploits China’s inadequate trade controls and weak UN Security Council (UNSC) sanctions enforcement to purchase these goods. It uses private Chinese front companies which provide suppliers with false end-user statements… After acquiring the goods, smuggling networks arrange their shipment to Iran. In this type of smuggling operation, China is considered a transit or turntable country between the supplier and Iran.”
In 2012, the U.S. District Court for the District of Columbia indicted Parviz Khaki, an Iranian national, and his Chinese associate, Zongcheng Yi, on six counts of conspiracy, export control violation, fraud, and money laundering charges for procuring and attempting to procure “U.S. goods that can be used to construct, operate, and maintain gas centrifuges to enrich uranium” in Iran. The detailed list of goods can be found in the Court’s indictment. Yi allegedly acted as Khaki’s front man, concealing from his U.S. suppliers that actual destination of the U.S. goods was Iran. While the Government of the Philippines acted swiftly to apprehend Khaki, who was present in their country, the Chinese government has failed to bring Yi, a Chinese national and purported managing director of a major company in Guangzhou City, to justice.
According to the ISIS, the Khaki/Yi case is just one of many incidences in which Chinese individuals or firms have acted as go-betweens for Iranian entities seeking sensitive or controlled U.S. goods. In another example, on May 12, 2012, the District Court of Massachusetts charged Qiang Hu, a Chinese citizen, with one count of conspiracy to violate export controls. He allegedly used his position as sales manager at MKS Instruments Shanghai Ltd. to fraudulently obtain U.S. export licenses and sell over $6.5 million worth of MKS pressure transducers, a technology classified as “dual-use” under U.S. export control law. MKS pressure transducers can be seen in photos from Iranian President Ahmadinejad’s visit to the Natanz enrichment plant in 2008. Details from the Hu indictment provide a window into how Iran skirts international and U.S. sanctions and exploits weak Chinese trade controls to acquire sensitive U.S. technology needed to advance its development of a nuclear weapon.
The executive branch is required to designate a country as a “Destination of Possible Diversion Concern” when it allows substantial diversion of proliferation-sensitive U.S.-origin goods, services or technologies to Iran. Such a designation would require Chinese companies to apply for special licenses to import controlled or sensitive U.S goods, on account of the high risk of diversion to Iran. China’s failure to address weaknesses in its export controls regime and to enforce UNSC sanctions is a loophole that Iran will continue to utilize, unless we take steps to close it by designating China a “Destination of Possible Diversion Concern.” I urge you to consider doing so and request that, should you determine that China does not meet the requirements for the designation, you reply to me explaining your determination. I am grateful for your efforts to enforce these important sanctions against Iran’s nuclear program and look forward to working with you on this important issue.
Robert P. Casey, Jr.
United States Senator