Chinese companies evade U.S. sanctions

Chinese state-owned companies sanctioned by the U.S. government for illicit arms sales to Iran evaded those restrictions by selling goods to U.S.-based companies, according to a report by a Washington research group.

“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,” the report by the Wisconsin Project on Nuclear Arms Control stated.

Since 2006, there were 250 shipments to 42 U.S. destinations from companies in China or subsidiaries that were carried out in apparent violation of U.S. nonproliferation sanctions, the report stated.

The report faulted the Treasury Department’s Office of Foreign Assets Control for not properly enforcing some 30 economic sanctions programs because it lacks the resources and funding for monitoring.

Adam Szubin, director of the Office of Foreign Assets Control, said in a statement that transactions by U.S. banks with banned entities often “tend to be inadvertent and are corrected quickly upon detection.”

“If we see U.S. companies that are knowingly engaging in transactions with a proliferation target or front company, or that those targets are attempting to circumvent U.S. sanctions, we pursue those cases aggressively,” he said.

Disclosure of the problems related to sanctions enforcement comes as the Obama administration is weighing new economic sanctions against Iran for its failure to abide by international controls on its nuclear program.

The report reveals that U.S. companies have been receiving prohibited imports from several Chinese companies that are denied access to the U.S. market because of weapons-proliferation sanctions related to Iran’s missile and nuclear programs.

One of the companies is the China Precision Machinery Import-Export Corporation (CPMIEC), that U.S. officials in the past described as a “serial proliferator” of missile technology to Iran.

CPMIEC has been the target of U.S. proliferation sanctions since 1991 over its sales of short-range missiles and related technology to Iran and Pakistan. More recent sanctions for its arms sales were imposed in 2002 and 2003.

The report identified a second Chinese firm that evaded U.S. trade restrictions as LIMMT Economic and Trade Company Ltd., which the project revealed was using a new alias to continue trading with U.S. companies in violation of sanctions.

LIMMT was indicted by a Manhattan grand jury in April on charges it covertly used New York banks to finance large quantities of restricted material to Iran for its ballistic missile and nuclear programs.

The report called on Congress to boost Treasury resources needed for enforcing sanctions on companies involved in illicit arms sales.

“That is not happening today,” the report said, noting a 2007 Treasury inspector general report that found an increase in sanctions programs from 21 to 29 between 2001 and 2004 with no additional personnel or funding.

The group uncovered the security lapses through an open-source survey of Chinese company sales and export documents, said Gary Milhollin, the project’s director.

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About the Author
Bill Gertz

Bill Gertz

Bill Gertz is a national security columnist for The Washington Times and senior editor at The Washington Free Beacon (www.freebeacon.com). He has been with The Times since 1985.

He is the author of six books, four of them national best-sellers. His latest book, “The Failure Factory,” on government bureaucracy and national security, was published in September 2008.

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