Identifier
Created
Classification
Origin
04TAIPEI3114
2004-10-06 10:39:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

DEMARCHE ON TAIWAN'S EXPORT CONTROLS

Tags:  ETTC KSTC PARM TW 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003114 

SIPDIS

STATE FOR EAP/TC AND NP/ECC
STATE PASS USTR/KI
STATE PASS AIT/W/RUZICKA

E.O. 12958: DECL: 07/19/2014
TAGS: ETTC KSTC PARM TW
SUBJECT: DEMARCHE ON TAIWAN'S EXPORT CONTROLS

REF: A. A) STATE 213006


B. B) TAIPEI 3001

C. C) TAIPEI 3019

D. D) TAIPEI 3051

Classified By: AIT Economic Chief Daniel Moore; REASONS 1.4 (B,D)

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003114

SIPDIS

STATE FOR EAP/TC AND NP/ECC
STATE PASS USTR/KI
STATE PASS AIT/W/RUZICKA

E.O. 12958: DECL: 07/19/2014
TAGS: ETTC KSTC PARM TW
SUBJECT: DEMARCHE ON TAIWAN'S EXPORT CONTROLS

REF: A. A) STATE 213006


B. B) TAIPEI 3001

C. C) TAIPEI 3019

D. D) TAIPEI 3051

Classified By: AIT Economic Chief Daniel Moore; REASONS 1.4 (B,D)


1. (C) Summary: AIT Econ delivered ref A talking points to
BOFT on October 5, and to NSC on October 6. BOFT reported
that on September 30, Taiwan Customs stopped two shipments of
machine tools being shipped by Ching Hwee to "COSCO
Logistics" in Dalian, China (across the bay from North
Korea). NSC stated that unless there was proof machine tools
would be used to produce arms, there was no legal basis to
stop their export. End Summary.

Shipments Stopped as Result of U.S. Information
-------------- --


2. (C) After AIT delivered ref A talking points on October
5, BOFT reported that on September 30, Taiwan Customs had
acted on the instructions contained in the BOFT-DGC letter
reported ref B (Taipei 03051) and stopped two Ching Hwee
shipments of machine tools leaving Taichung Harbor bound for
"COSCO Logistics" in Dalian City, Liaoning Province, China (a
major container port just across the bay from North Korea).
In response to Ching Hwee,s complaints over this action,
BOFT informed Ching Hwee executives that the action was taken
due to suspicions that the machine tools were destined for
North Korea, and for use in arms production. BOFT explained
that according to Taiwan,s export control &catch-all8
provisions, although the machine tools are not on any
sensitive high-tech commodity (SHTC) list, the possibility
that the goods could be used in weapons manufacturing made
them subject to export controls.

Taiwan,s Ching Hwee and North Korea,s Ryonha
--------------


3. (C) BOFT noted that Ching Hwee does not export any goods
on the SHTC list and has never applied for an SHTC permit.
In fact, according to BOFT,s investigation, Ching Hwee does
not product any goods at all, but is only a trading company.
According to BOFT, Ching Hwee has a total capitalization of
only about US$ 1 million and is owned by four private
individuals, who also serve as company executives. If true,
this raises the question of what Ching Hwee would have to

offer in a joint venture with the Ryonha Company. BOFT said
it will continue and deepen its investigation of Ching Hwee
and compile information on all of the company,s exports and
imports.

Strange Information
--------------


4. (SBU) A quick search of the internet shows that the
Ryonha Machinery Joint-Venture Company can be contacted
through its office in Pyongyang, North Korea. According to
Taiwan Customs, shipping documents, the Ryonha Company is
one of the main purchasers of Ching Hwee,s machine tool
exports. However, strangely, the Ryonha Company website
indicates that it manufactures and exports sophisticated CNC,
electric discharge, and machining center machine tools
similar to those that it imports from Ching Hwee. In fact,
according to press reports, the Ryonha Company exhibits its
machine tools, which have been certified by the International
Standards Organization to meet ISO 9002 standards, at an
international industrial exhibition held in Pyongyang each
year. While the Korean letters in the Ryonha name are
phonetic and without exact Chinese equivalents, the same
letters are used by Koreans to phoneticize the main Chinese
character in Dalian. The name Ryonha could be taken to mean
&little Dalian.8 If Washington agencies know the Chinese
characters used to write Ryonha, this information would be
useful to AIT in further researching the company.

How the United States Can Champion Strict Export Control
-------------- --------------


5. (C) BOFT indicated they would like to see further
restrictions on exports of machine tools from Taiwan to North
Korea, but needed support from the United States in the
interagency struggle within the Taiwan government.
Specifically, BOFT repeated its request for information on
the restrictions that Japan, South Korea, Italy, Germany, and
other countries place on machine tool exports to North Korea.
If these countries restrict machine tool exports to North
Korea, that would be a strong argument in persuading Taiwan
agencies to agree to do likewise. Second, BOFT mentioned the
P2S5 chemical that was seized earlier this year in Kaohsiung
at the request of U.S. agencies. BOFT indicated that U.S.
assistance in helping to get rid of the stuff would be a
criterion in determining future cooperation. BOFT said
Taiwan,s Environmental Protection had refused to dispose of
the chemical. BOFT was unaware if the United States has
provided instructions on disposal.

NSC Response to Talking Points
--------------


6. (C) The NSC response to the Ref A talking points on
delivered on October 6 was cordial, but not as forthcoming.
In response to the suggestion that Taiwan should stop machine
tool to North Korea the NSC officials said that there were no
legal grounds for stopping these shipments. When AIT
suggested that Taiwan,s &catch-all8 provisions provided a
legal basis, NSC officials said even with the products send
to North Korea, there was no proof the machines were procured
to produce weapons. It would be even more difficult to prove
that shipments to third territories or front companies were
intended for weapons production. The NSC officials suggested
better information sharing with the United States and
international export control agencies might help address this
issue of proof. They seemed interested in attending the
planned EXBS workshop on export control laws and regulations
that will be held in Taipei in November.


7. (C) Comment: Export control is apparently a hotly debated
issue within the Taiwan government, with BOFT and Customs
already going well beyond what the NSC sees as the limits of
current legislation. AIT believes that providing BOFT with
the arguments it needs to prevail in the interagency debate
would be an effective tactic in getting stronger exports
control in Taiwan. End comment.

PAAL
PAAL