Chinese Security Company Accused of Corruption Lobbies U.S. Government

Security equipment producer aims for TSA to certify its products

Liang Yinpeng, deputy general manager of Nuctech Co., demonstrates a new liquid scanner in 2006 / AP
October 4, 2016

A Chinese security equipment company with a checkered record and ties to the People’s Republic of China’s government has retained lobbyists in Washington in an effort to influence the Transportation Security Administration.

According to federal records, Nuctech Company Limited, a Chinese producer of X-Ray scanners and other security equipment, wants the TSA to certify its products, which could pave the way for their use in the U.S. aviation industry. 

Nuctech recently hired Cassidy & Associates, a Washington, D.C., lobbying firm, to push for "TSA certification," according to a lobbying disclosure form signed last month and first reported by Politico Influence. Nuctech has demonstrated an interest in expanding its business in the United States, participating in the ASIS International Security Conference this month in Orlando in order to showcase products for U.S. and North American markets.

The company, which originated at China’s Tsinghua University and was led by the son of former Chinese president Hu Jintao until 2008, has been connected to corrupt business practices. China has also been faulted for imposing illegal duties on European security equipment in order to protect Nuctech in the Chinese market.

When contacted by the Washington Free Beacon, TSA spokeswoman Lisa Farbstein said, "TSA cannot be lobbied to certify a piece of detection equipment."

The Beijing-based Nuctech has been a provider of security equipment in China since 2006, when it was awarded a contract by the Chinese government for scanners to detect liquid explosives at all of China’s airports.

Earlier this year, Nuctech was linked to corruption charges in Taiwan, where prosecutors indicted a high-ranking airport police official in July for allegedly accepting kickbacks from Nuctech in exchange for allowing for the procurement of the company’s equipment despite bans on such Chinese-made products. An employee of the company also allegedly seduced a Taiwanese official, according to regional media reports. Moreover, Nuctech’s X-ray machines were found by airport security officials to be below standard when compared to other international products.

Similar allegations of substandard equipment have been made by officials in the Philippines. The Philippine Bureau of Customs was asked in August to review a 2006 contract for Nuctech mobile X-ray machines after they were found to be "exorbitantly overpriced" and poor performing when compared to other products.

The company was also subject to scrutiny years earlier when Namibia and the European Union launched separate investigations into Nuctech in 2009 over allegations of corruption.

Namibia’s Anti-Corruption Commission investigated a monetary exchange between a local consultancy and Nuctech, which had won a multi-million pound government contract with the Namibian government to provide scanners to its ports and airports. Three people tied to the case were arrested in 2009 by Namibian officials on charges of fraud, corruption, and bribery. The controversy led China to censor internet news reports referencing the case.

The same year, the European Union launched an investigation into whether Nuctech engaged in unfair trade practices when selling X-ray scanners in Europe, after a U.K. competitor accused the company of "dumping" its products on the market. The EU eventually slapped tariffs of 34 percent on the company for selling equipment in Europe at unfairly low prices.

Less than a year later, China placed anti-dumping duties on X-ray equipment produced in Europe, at the request of Nuctech. Beijing imposed a 33.5 percent duty on imports from a company in Germany and a 71.8 percent tariff on those from other companies in Europe. The World Trade Organization later ruled that China’s anti-dumping tariffs on the EU goods violated global commercial law.

Despite Nuctech’s global reach, which includes providing security scanners for the Rio Olympics in Brazil this past summer, it has done less business in the United States. The company contracted with the Port of Los Angeles years ago to supply an X-ray unit to scan cargo, but the contract was cancelled when the $2.4 million unit failed field tests. The contract was controversial at the time, with some arguing that the United States should not use equipment produced by China for national security purposes.

Nuctech’s decision to hire a Washington lobbying shop demonstrates the company’s interest in expanding its influence in the United States.

A spokesperson for the TSA told the Free Beacon that a piece of technology becomes certified after being tested by the Department of Homeland Security against the TSA’s detection standard. If the equipment passes certification testing, the TSA issues a letter to the company indicating that the product has met TSA’s requirements.

Certification is a "subset" of TSA’s overall qualification program and does not mean that the technology is eligible for procurement or deployment to the TSA’s federalized airports, the spokesperson said.

Currently, two Nuctech X-ray devices are qualified by the TSA to screen air cargo but are "grandfathered," according to the most recent version of the agency’s Air Cargo Screening Technology List, or ACSTL, which states that the pieces of equipment are set to expire from the list at the end of 2020. This means that the TSA directs regulated companies that transport cargo to phase out the equipment and not purchase the devices for use in the future.

The lobbying disclosure was initiated less than two weeks after the most up-to-date version of the ACSTL was issued.

The TSA said that items on this list undergo a separate certification testing than technologies approved for deployment to federalized airports.

Representatives for Nuctech did not respond to requests for comment by press time. A representative for Cassidy & Associates declined to comment, citing a long-standing policy to not discuss its work for clients with the press.

The TSA has been scrutinized for ongoing vulnerabilities in airport security, despite the agency’s efforts to step up its practices as concerns over terrorism run high.

Published under: China , TSA