Deal With Chinese State-Owned Firm to Supply Security Equipment to Canada’s Embassies Should Be Cancelled: Expert

July 21, 2020 Updated: July 22, 2020

Concerns are growing over contracts recently awarded by the Canadian government to a controversial Beijing-based company that is directly connected to the Chinese Communist Party. One expert says the deal should be cancelled in light of the risks to Canada’s security.

The five contracts awarded to Nuctech Company, reportedly worth $6.8 million, involve installing X-ray and other scanning equipment to provide security at Canadian embassies, consulates, and high commissions around the world—170 in all.

Nuctech was founded in 1997 by the son of former CCP leader Hu Jintao and also has links to the Chinese military. In 2014, the U.S. Transportation Security Administration banned Nuctech equipment from the country’s airports due to security concerns.

“Nuctech does not hide the fact that it is a Chinese government-owned company, and like any Chinese-owned company it is required to cooperate with the Chinese state intelligence apparatus,” Marcus Kolga, a senior fellow at the Macdonald-Laurier Institute, told The Epoch Times.

“Officials in both the U.S. and EU have raised concerns about the security risks posed by Western airports, which give the Chinese government potential access to detailed information about them and those who travel through them. Those same security concerns are just as applicable to Canada’s embassies and anywhere else these Chinese state-developed and -built scanning systems are installed.”

Kolga says any existent contract should be “immediately cancelled” and suggests the government launch a review of Canada’s procurement policies to determine how to better safeguard the country’s security.

Foreign Affairs Minister Francois-Phillipe Champagne has said he will review the contracts in light of Nuctech’s connection to the Chinese regime. An emailed statement from Global Affairs says the “standing offer is not a contract, and Global Affairs has not purchased any equipment from Nuctech at this time.”

Nuctech has been dubbed the “Huawei of airport security” in that it has provided security equipment such as X-ray machines, scanners, and explosive detection systems to airports and customs offices in over 150 countries, giving it access to the strategic infrastructure of those countries in areas as sensitive as aviation and border security.

When it comes to the CCP’s weaponization of supply chains that companies like Nuctech have been alleged to facilitate, one worry among European governments has been how the systems and databases Nuctech uses could transmit harmful software and cause disruption at airports.

Jan-Peter Kleinhans, a researcher on supply chain security at the Stiftung Neue Verantwortung think tank in Berlin, Germany, told Politico that “Europe slowly is realizing how big a problem this potentially could be.”

The Wall Street Journal reported on June 28 that the U.S. National Security Council is targeting Nuctech as a threat to security due to its presence at ports, border crossings, and airports across Europe.

Part of the rationale for entering such ventures with Chinese-state backed companies, Huawei also being one of them, may be that these companies can bid much lower on contract tenders, allowing Western countries to save money.

But Kolga says it’s not worth it given the security risks involved.

“The savings that Western officials think they may be gaining by purchasing bargain-basement-priced Chinese technology—and a great many other products—is in fact an illusion which we pay for in having our privacy and security potentially compromised,” he says.

Nuctech has also drawn criticism for alleged unfair business practices and corruption.

In February, the Taipei Times reported that the former head of Taiwan’s Aviation Police Bureau Sun Yi-ming was found guilty of corruption based on charges related to illicit activities he was involved in. The activities included working with Nuctech to “deceive” Taiwan’s regulators by having parts shipped to Japan for assembly and repackaging, as well as accepting kickbacks, in relation to a contract with Nuctech to procure X-ray scanners.

Experts in Taiwan said the case “reeked of a Chinese intelligence operation, with an eye to penetrating Taiwan’s airport and border security,” the Taipei Times reported.

In 2008, Nuctech was involved in a bribery scandal in Namibia relating to a $55.3 million contract it had signed with the government. Namibia’s anti-corruption commission discovered that a $12.8 million down payment had been passed to the firm Teko Trading, which suggested an attempt to bribe Namibian authorities to secure Nuctech’s access to the market and its influence in the country.

In 2010, the EU imposed a five-year tariff on Nuctech products for alleged dumping on the European market.

The company’s pending Global Affairs deal raises important questions about how Canada’s foreign policy should handle companies that have ties to autocratic regimes.

Kolga believes Canada should “impose a temporary moratorium on the purchasing of any technology products from China and Russia until a fundamental review and update of Canada’s procurement policies is completed to ensure that our national security is not compromised by them.”

Global News reports that since 2017, Nuctech has been awarded four contracts valued at $6.5 million to provide scanners and lab equipment to the Canada Border Services Agency.