The penalties, which took effect May 9 but were announced by the State Department Thursday, call for termination of all existing contracts between the US government and the North China Industries Corporation, or NORINCO, and Shahid Hemmat Industrial Group, a leading Iranian missile manufacturer.

The order also bans all US assistance to the concerns and calls for the revocation of all export-import licenses they may have held to conduct business in the United States, according to State Department spokeswoman Jo-Anne Prokopowicz.

The two arms giants and their subsidiaries are also barred from selling goods and services in the United States.

"These penalties were imposed because the US government determined that these entities contributed materially to the efforts of a foreign country -- in this specific case Iran - to use, acquire, design, develop, produce or stockpile missiles capable of delivering weapons of mass destruction," Prokopowicz told AFP.

The measures will remain in effect for two years.

A key supplier of the People's Liberation Army of China, NORINCO also has a visible presence in the US market as an exporter of hunting rifles and other firearms.

It has a registered capital of about 30 billion dollars, is involved in more than 100 joint ventures around the world and, in addition to weapons, sells high technology products, chemicals and construction machinery, according to GlobalSecurity.org, a local research organization.

Iran's Shahid Hemmat has already been targeted by the United States for alleged missile technology exchanges with North Korea.

In April 2000, the administration of president Bill Clinton imposed sanctions against it -- along with three other Iranian companies -- for "knowingly engaging in the export of military technology."

The company, which is known as a close partner of Russian defense firms, is believed to have played a crucial role in designing the Shahab-3, an intermediate-rage Iranian missile, which experts say is an improved version of North Korea's Nodong.

The US Central Intelligence Agency believes the Shahab-3 is now "in the late stages" of development.

The State Department refused to disclose what specific transgressions the two firms had committed against the Missile Technology Control Regime.

But Prokopowicz noted that while China's non-proliferation performance has improved, "problems remain in the People's Republic of China's enforcement and implementation" of export controls adopted last year.

In a report sent to Congress last April, the CIA said Chinese companies had provided dual-use missile-related items and raw materials to countries such as Iran, Libya, "and to a lesser extent, North Korea" in the first half of last year.

SPACE.WIRE