Thursday, October 30, 2008
By Jacob Goodwin, Editor-in-Chief
Published October 16th, 2008
Color X-ray Image
For the first time, a major U.S. port has purchased a sophisticated high-energy X-ray scanning system from a Chinese manufacturer, and it is paying for it with a $1.7 million port security grant awarded by the U.S. Department of Homeland Security.
The Port of Los Angeles, the nation’s largest, has procured a mobile X-ray scanning system, mounted on a Mack truck chassis, which was manufactured by a Chinese company called Nuctech Company Limited, headquartered in Beijing, whose president happens to be the son of the President of the People’s Republic of China. The Nuctech equipment will be used by the port police to inspect trucks delivering food, groceries and other supplies to cruise ships that are scheduled to depart from the busy West Coast port.
The bid that included the Nuctech scanner, which was cheaper than rival bids submitted by Smiths Detection, a British company with offices in New Jersey, and Rapiscan Systems, of Torrance, CA, was formally submitted to the port by a small U.S.-based business headquartered in Rancho Palos Verdes, CA, known as DULY Research Inc.
DULY Research was awarded a $1,880,000 contract in September 2007, according to a memo issued by the port’s homeland security division. Smiths Detection bid just over $2.7 million and Rapiscan’s price was about $2.9 million, sources told GSN.
"We were cognizant of the fact that we were the first port to acquire this Chinese system," said George Cummings, the port’s director of homeland security. "They were the low bidder and they complied with all the technical requirements," he added.
Some observers of the transaction have raised questions about the wisdom of U.S. tax dollars being handed to a Chinese manufacturer, the degree to which Nuctech may have "reverse engineered" the X-ray technology originally developed by Western companies, the possibility that Nuctech may have had its price subsidized by the government of the People’s Republic of China, and the notion that Nuctech may have engaged in illegal "dumping" by offering its product below its own manufacturing costs.
Cummings, the homeland security director at the port, told GSN he is not troubled by any of those possibilities.
He explained that the purchase of the Model MT1213LH mobile X-ray scanning unit was done in accordance with the procurement rules and regulations of the City of Los Angeles, which does not include any "Buy America" provisions or clauses that would prohibit the purchase of Chinese-built equipment.
He also explained that U.S. Government officials at the Federal Emergency Management Agency (FEMA), which administers the department’s grant programs, knew about the equipment’s origin in China and had no objection to authorizing a cost reimbursement to the California port. "The equipment will be purchased by grant funding awarded in Round 3 of the Federal Port Security Grant Program and is budgeted in the Engineering Division budget for the current fiscal year," said the port’s contract award memorandum, dated Sept. 10, 2007.
Some industry observers have speculated that Nuctech based its product’s design on technology developed years earlier by other Western X-ray manufacturers, but GSN could not identify any patent infringement lawsuits initiated or threatened by any of Nuctech’s competitors. The Chinese firm has ridden its technical expertise – and its remarkably low prices – to victory after victory in numerous European tenders during the past 18 months or so, sources say. Its scanning equipment is currently installed in more than 60 countries.
It is never easy to determine whether a company is submitting formal bids at prices below its own production costs, actions which could lead to charges of illegal dumping, but few observers doubt that Nuctech has an extremely close relationship with the Chinese government. The fact that the president of Nuctech, 37-year-old Hu Haifeng, is the son of Hu Jintao, the President of the People’s Republic of China and the General Secretary of the Communist Party in China, only fuels such suspicions.
The Port of Los Angeles seems to have taken appropriate steps to select the winning bidder. Detailed proposals from Nuctech, Smiths Detection and Rapiscan were closely examined to determine if the products offered would conform to the technical requirements.
In addition, the bid information was provided to Dr. Charles Massey, formerly of Sandia National Laboratories and currently under contract to the Department of Energy to evaluate scanning systems as part of Uncle Sam’s Secure Freight Initiative, for his independent evaluation.
"We don’t have any heartburn about this," explained Cummings, the port’s homeland security director. "We did all the due diligence we had to do. We took it to our board. We’re comfortable with this decision."
Critics of the transaction, who requested anonymity, raised the specter of sensitive X-ray images and cargo manifests being archived on the X-ray scanning system and, perhaps, transmitted via the Internet back to Nuctech in China, or to the Chinese government. Indeed, the mobile system was required to offer that technical capability.
"Automatic digital image archiving with image review of 25,000 images or greater with a flatbed scanner to record, save and associate related documents and notes including system operators, recipient, date and time," was listed as one required capability in the port’s official specification document.
"Nuctech will supply the wireless devices for transmission of images to remote inspection location, and for uploading data via internet," promised Nuctech, in its formal proposal to the port.
Cummings acknowledged that the system theoretically could capture, store and transmit such X-ray images -- and transmit them to China or elsewhere -- but wondered who might have any interest in meaningless images of meat and groceries.
The high-energy X-ray system has now arrived at the port and is undergoing testing, said Cummings. Port officials need to develop an operational health and safety program which can win the port’s approval, and make some site improvements, before the equipment can begin full-time operation.
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