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Senior Senators Want More Penalties in Export Control Enforcement Case Involving China

Mid- to late August in Washington, DC. Little, if any, significant traffic during rush hour. Sidewalks a little less congested. Most of the political class is out and things are good, good that is if your not under the microscope of the Senate Armed Services Committee.

Senate Armed Services Committee Chairman Sander Levin and Ranking Member John McCain fired off a letter to the Obama Administration recommending that Pratt & Whitney Canada (P&WC) be made more ineligible from receiving U.S. Governments contracts. The technical term for this is debarment or suspension.

The first Chinese attack helicopter the Z-10 (see video below), built with U.S. technology procured in violation of U.S. export control laws.

P&WC recently signed a plea agreement with the federal government where company officials pled to multiple violations of sending controlled U.S. technology to the Chinese government for use in Chinese attack helicopters. As if that were not bad enough, they also had to plea to making materially false, fictitious, and fraudulent statements during the course of the investigation.

In addition to revoking certain export privileges, Levin and McCain argue that the $75 million fine is not enough because, in essence, “no individual manager or employee has been held personally accountable for criminal misconduct.” The company has not responded, however, the President of the Canadian Association of Defence and Security Industries Tim Page said to Wings Magazine:

“Page wouldn’t comment specifically on the Pratt and Whitney Canada case, but suggested that the drum-beating in Washington is being influenced by the presidential race. It is an election year, for sure, and I don’t know I’d go further than that,” he said. “All parties doing business with the States need to be conscious of their domestic laws. Canada’s security and defence industry is conscious of U.S. domestic law.”

Not the most appropriate statement considering that Canadian companies receive much more flexibility under U.S. export control laws than any other country in the world. The point is that this was a Canadian company that committed these violations. We expect better compliance from Canadian companies. If we can’t, what about our other trade partners? Which brings me to the last point, export control reform.

Will this case, and others like it in recent months, impact the Obama Administration’s export control reform efforts? Who knows, however, the Levin and McCain letter raise the specter that it will: “the widespread nature of these violations by just this one major defense contractor raises the possibility of systemic deficiencies with the oversight and enforcement of federal export controls … please also explain how the Defense Department and the State Department will work more closely together to ensure compliance.”

More fulsome enforcement provisions could have been implemented months ago, however, there seem to be other equities at play. Congress and the Obama folks are still wrangling about who gets to do what with what authorities, for example.  More enforcement rules and monies would not have prevented this recent set of violations, but it could have set a better tone for future enforcement action.

In the end, this is another case study as to why the Chinese cannot be entrusted with just about any advanced U.S. technology. If they cannot acquire it legally, they will resort to any means to procure it. These folks have export control laws in name only. Their goal is to build a military arsenal that will weaken U.S. defenses and interests around the world. They are succeeding.

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