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Cancel VEU program for China, US legislator urges

"We cannot give China's military an open pipeline to advanced US technologies that have rightly been restricted."

Edward Markey, a Democratic representative

A federal program to ease US exports to China may need to be "scrapped" because companies with alleged ties to the Chinese military were allowed to participate, a US lawmaker said on Tuesday.

The two Chinese companies are among five participants the US Commerce Department selected in October to import high-tech US goods without a license.

The "verified end-user" (VEU) program, launched in June, gives pre-screened Chinese companies access to US electronics, semiconductor equipment and other technologies. Companies with VEU status must report how they're using the US technology and allow US officials to inspect their facilities to confirm the products are not being diverted to military uses.

Earlier this month, the Wisconsin Project on Nuclear Arms Control, a nonprofit proliferation watchdog, called for program's suspension because two of the participants, one of which is a joint venture with Boeing Co, have ties to China's military and government.

"Serious questions have been raised about this new verified end-user policy," Representative Edward Markey, a Democrat, said in a release on Tuesday.

"We cannot give China's military an open pipeline to advanced US technologies that have rightly been restricted," he said.

In a letter sent on Tuesday, Markey asked Secretary of Commerce Carlos Gutierrez for more information about the two companies flagged by the Wisconsin Project: Shanghai Hua Hong NEC Electronics Co and BHA Aerocomposite Parts Co.

Eugene Cottilli, a spokesman for Commerce's Bureau of Industry and Security, said the program "protects national security by using a strict vetting process" and involves technologies the companies have already been approved to receive.

Matthew Godsey, a research associate at the project, said the parent company of Shanghai Hua Hong is owned by China Electronics Corp, which provides electronics to the People's Liberation Army.

BHA is partly owned by AVIC I, a state-owned company that makes Chinese military aircraft, Godsey said.

Its two other owners are the Chicago-based Boeing Co and Stamford, Connecticut-based Hexcel Corp.

A Boeing spokesman referred questions to an aerospace industry group.

Edmund Rice, president of the Coalition for Employment Through Exports, said: "The industry would welcome Markey looking at this program, but what he will find is that the US government has very tight controls on dual-use transfers to China."

The other companies selected in October were: Applied Materials China, a subsidiary of semiconductor equipment company Applied Materials; National Semiconductor Corp, a chipmaker based in Santa Clara, California, with several plants in China; and Semiconductor Manufacturing International Corp, a Chinese company.
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