Chinese Man Convicted on Charges of Exporting U.S.-Origin Pressure Transducers to Iran

On January 27, 2016, Chinese national Sihai Cheng pleaded guilty to six counts related to the export of American-made pressure transducers to Iran in violation of U.S. export laws.  He had been extradited from the United Kingdom to the United States to face the charges on December 5, 2014.

Also indicted in the case were Iranian national Seyed Abolfazl Shahab Jamili, who allegedly bought the transducers from Cheng, Jamili’s Iran-based company, Nicaro Engineering, and Eyvaz Technic, the Iranian end-user. Eyvaz Technic has been sanctioned by both the United States and the European Union for its involvement in Iran’s nuclear program. According to the European Union, Eyvaz has supplied vacuum equipment to Iran’s Natanz and Fordow uranium enrichment facilities, and has provided pressure transducers to Kalaye Electric Company, a centrifuge testing facility located in Tehran.

In 2005 Cheng allegedly began selling Jamili thousands of Chinese-manufactured parts with nuclear applications, such as vacuum pressure valves, electronic switches, and stainless steel bellows. Jamili in turn sold these goods to Eyvaz, which apparently supplied them to the Iranian government. On Jamili’s instructions, Cheng often shipped the parts directly to Eyvaz in Tehran using commercial air freight delivery services. Jamili informed Cheng in a 2007 e-mail that the parts he needed were for a “very big” and “secret” project. Beginning in February 2009, Jamili worked with Cheng to obtain higher quality pressure transducers for Eyvaz: those manufactured either by Edwards Limited, a British firm, or by the American company MKS. Eyvaz even specified the model number of the export-controlled MKS pressure transducers it sought — the “722a model.” Pressure transducers have a variety of commercial applications but are also used to regulate gas pressure in centrifuges during uranium enrichment.

After receiving Jamili’s request, Cheng contacted an unnamed employee at MKS Instruments Shanghai, a wholly-owned subsidiary of MKS Instruments in Andover, Massachusetts. This employee then set up two shell companies in China and used these companies as false end-users for the pressure transducers obtained from the United States. Other employees at MKS Shanghai listed legitimate Chinese companies as customers on the intra-office purchase orders they submitted to MKS headquarters in the United States. MKS-Andover, in turn, unwittingly used this information to apply for the requisite export licenses from the U.S. Department of Commerce. Once the parts arrived at MKS-Shanghai, they were diverted, and then sold to Cheng.

Between April 2009 and January 2011, Cheng ordered more than 1,000 pressure transducers worth over $1.8 million through employees at MKS-Shanghai. On Jamili’s instruction, the transducers were then shipped from China to Tehran in small batches so as to avoid attracting attention from the manufacturer. In his e-mails with MKS-Shanghai employees, Cheng claimed he represented the Shanghai office of Hong Kong Sohi Technology Co. Ltd., a trading firm he used to conduct his transactions.

Although the indictment is unclear as to the exact number of transducers that reached Iran, a publicly-available photograph shows former Iranian President Mahmoud Ahmadinejad standing next to MKS transducers mounted on centrifuges in Iran’s Natanz uranium enrichment plant.

This is not the first time MKS’s Shanghai office has been implicated in illicit diversion of dual-use pressure transducers. In May 2012, Chinese citizen Qiang Hu was arrested in North Andover, Massachusetts and charged with illegally supplying pressure transducers to end-users in China in violation of U.S. export laws. Hu, the sales manager at MKS-Shanghai, later pled guilty to using fraudulent end-user information to deliver over $6.5 million worth of MKS export-controlled pressure transducers to unauthorized customers. In both cases, MKS employees created shell companies to pose as end-users for their illegal transactions.

Cheng was held in custody in the United Kingdom following his arrest in February 2014.  He was extradited to the United States on December 5, 2014, made an initial appearance at the U.S. District court in Boston on December 8, and was arraigned on December 12.  Cheng pleased guilty to six counts of conspiracy to commit export violations, conspiracy to smuggle goods, and illegal exports of U.S. goods to Iran and was sentenced to 9 years in federal prison on January 27, 2016.  On February 8, 2016, Cheng filed a motion to appeal his case.