China -- Nonproliferation Sanctions Imposed on Chinese Entities

Following is the text of a question taken at the January 25 regular State Department briefing on sanctions imposed on two Chinese companies and one individual for transferring sensitive equipment and technology to Iran. An answer was posted later in the day.

U.S. Department Of State
Office of the Spokesman
For Immediate Release
January 25, 2002
Taken Question for January 24, 2002
Daily Press Briefing

China: Sanctions Imposed on Chinese Entities Pursuant to the Iran Nonproliferation Act

Question: Can you provide details on the sanctions imposed on two Chinese companies and one individual that have been published in the Federal Register?

Answer: On January 16, 2002, the U.S. imposed penalties on two Chinese companies and one Chinese national pursuant to the Iran Nonproliferation Act of 2000. The Chinese entities are: Liyang Chemical Equipment, China Machinery and Electric Import and Export Company, and Q.C. Chen. (We cannot comment on whether or how Chen is related to the two companies.)

The determination was published in the Federal Register on January 24, 2002. The penalties will remain in effect until January 15, 2004.

The penalties were imposed on the Chinese entities for the transfer to Iran since January 1, 1999, of sensitive equipment and technology controlled by the Australia Group (AG). The Australia Group is a 33-nation nonproliferation regime that seeks to prevent the proliferation of chemical and biological weapons.

The law does not require imposition of penalties against the recipient entities, so no Iranian entities are named in this determination.

The penalties imposed on the three Chinese entities are:

• No department or agency of the U.S. Government may procure, or enter into any contract for the procurement of, any goods, services, or technology from the three Chinese entities;

• No department or agency of the U.S. Government may provide any assistance to the three Chinese entities;

• The three entities shall not be eligible to participate in any assistance program of the U.S. Government;

• U.S. Government sales of any item on the U.S. Munitions List to any of these Chinese entities are prohibited, and sales of any defense articles, defense services or design and construction services controlled under the Arms Export Control Act are to be terminated;

• New licenses are to be denied, and existing licenses suspended, for transfer to these three entities of items controlled under the Export Administration Act of 1979 or the Export Administration Regulations.

Although the law contains waiver provisions, we did not believe it was appropriate to waive the penalties in this case.

Q.C. Chen is already subject to U.S. sanctions. In May 1997, he was among seven Chinese entities sanctioned, pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991, for knowingly and materially assisting Iran's chemical weapons program through the transfer of chemical weapons precursor chemicals and/or chemical weapons-related production equipment and technology. These sanctions currently remain in place.

For many years we have made known to the Chinese Government our concerns about specific Chinese entities providing assistance to Iran's chemical weapons program. Q.C. Chen has been among the entities we have raised on multiple occasions. China was informed in advance through diplomatic channels of our recent sanctions decision; we are not in a position to discuss the details of our contacts on this issue.