Pu’nai Group Co., Ltd. (濮耐股份, 002225.SZ), a listed Chinese refractories producer, faces prosecution by Yingkou City People’s Procuratorate for smuggling 1,243.55 tons of natural flake graphite to its US subsidiary between April 2024 and March 2025, valued at ~RMB 5.98 million.
Case Background
- Method: Falsely declared under HS code 2504109900 (“other powdered natural graphite”) to bypass export licensing requirements.
- Key Personnel: Chairman Qi Changsheng, executives Meng Qiufeng and Yao Shuyang arrested; company management allegedly acquiesced to third-party logistics operations.
Strategic Material Context
Natural flake graphite was added to China’s dual-use export control list (Announcement 54, Dec 1, 2023) due to its critical military applications:
- “Three High” graphite (high purity, high strength, high density) used in missile nose cones, rocket nozzles, and aerospace components
- Previously routine HS 2504101000 exports now require Commerce Ministry licenses
Trade Compliance Implications
- Enhanced Enforcement: Prosecutors emphasize “smuggling state-prohibited import/export goods” – signals zero tolerance for strategic material violations
- Supply Chain Risk: Highlights compliance gaps in multinational subsidiaries and third-party logistics
Trade compliance professionals should implement robust screening protocols for graphite derivatives under China’s dual-use export control regime, meticulously verifying HS classifications, securing requisite export licenses, and conducting thorough audits of third-party logistics partners. This landmark case signals China’s escalating enforcement of 2023 strategic mineral controls amid intensifying US-China trade tensions. Members must remain vigilant for similar high-profile prosecutions across related critical materials; including gallium, germanium, and rare earths, where regulatory scrutiny continues to intensify. Proactive compliance measures are essential to mitigate exposure to these rapidly evolving enforcement risks.
Kindly refer to the following news reporting from China Energy News, a state-owned subsidiary under People’s Daily: