Identifier
Created
Classification
Origin
05TAIPEI1780
2005-04-14 08:56:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

TAIWAN'S INADEQUATE EXPORT CONTROLS

Tags:  ETTC PARM PINR PREL PTER TW 
pdf how-to read a cable
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 03 TAIPEI 001780 

SIPDIS

STATE PLEASE PASS AIT/W AND USTR
STATE FOR EAP/RSP/TC, EAP/EP, EB/IFD/OIA AND NP/ECC/MCCELLAN
STATE FOR INR/EC NKWG
USTR FOR SCOTT KI

E.O. 12958: DECL: 04/13/2025
TAGS: ETTC PARM PINR PREL PTER TW
SUBJECT: TAIWAN'S INADEQUATE EXPORT CONTROLS

REF: A. TAIPEI 1706


B. STATE 26545

C. 04 STATE 271561

D. 04 STATE 109219

Classified By: AIT DIRECTOR DOUGLAS PAAL, REASON 1.5 B/D

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 001780

SIPDIS

STATE PLEASE PASS AIT/W AND USTR
STATE FOR EAP/RSP/TC, EAP/EP, EB/IFD/OIA AND NP/ECC/MCCELLAN
STATE FOR INR/EC NKWG
USTR FOR SCOTT KI

E.O. 12958: DECL: 04/13/2025
TAGS: ETTC PARM PINR PREL PTER TW
SUBJECT: TAIWAN'S INADEQUATE EXPORT CONTROLS

REF: A. TAIPEI 1706


B. STATE 26545

C. 04 STATE 271561

D. 04 STATE 109219

Classified By: AIT DIRECTOR DOUGLAS PAAL, REASON 1.5 B/D


1. (C) Summary: On April 8 Taiwan's Bureau of Foreign Trade
(BOFT) gave AIT a report on its investigations into the She
Hong Company and Eumatech Company machine tool shipments to
Syria, as we had requested in refs C and D. The results of
the BOFT investigations, while welcome, suggest that the
Taiwan agencies charged with export control need to
significantly improve their processes before Taiwan can be
considered to have a strong export control regime. They also
illustrate the need for the United States to establish a
clear program for Taiwan to implement in order to realize the
commitments articulated by the Ministers of Economic Affairs
and Foreign Affairs in response to our recent demarche.
AIT/T has prepared a list of concrete steps (para 5) that it
believes Taiwan authorities should take to demonstrate their
professed resolve on export control and which are necessary
to upgrade Taiwan's export control system. End summary.


2. (C) BOFT Director Peter Ho began the meeting on April 8
by reiterating what his Minister (Ho Mei-yueh) had said on
April 7 (ref A),that MOEA fully supports the strengthening
of Taiwan's export control policies.

Investigation Goes Through the Motions
--------------


3. (C) As requested in the AIT demarches based on refs C and
D, BOFT has investigated the She Hong Company (maker of
"Hartford" machine tools) and the Eumatech Company machine
tool shipments to Syria. Ho said the investigation revealed
that from 2002 through September 2004 She Hong exported 21
separate shipments of machine tools to the Kaddour and Madani
Company of Syria. According to She Hong, the Kaddour and
Madani Company is a regional agent for machine tools, not an
end user itself. She Hong claimed it did not know the
identity of the end users, but tried to address export

control concerns. On the invoice of every shipment, She Hong
stipulated that the machines were "not to be used for WMD
purposes." According to the BOFT investigation, none of
machine tools exported by She Hong were on the Strategic
High-Tech Commodities (SHTC) lists. She Hong told BOFT that
it intended to abide by relevant export control regulations.
BOFT concluded that since the machine tools were not on the
SHTC lists, there was no requirement for an export license
and no violation of Taiwan's export control regulations.
Nonetheless BOFT requested Taiwan Customs to add She Hong to
its list of "high-risk" companies and that all its shipments
be closely monitored. BOFT reported that the Eumatech
Company was not registered with the Ministry of Economic
Affairs (MOEA) and cannot legally import or export. (AIT has
since requested the Ministry of Justice Investigative Branch
to investigate Eumatech further.)

Results Ignore "Catch-all" Violations
--------------


4. (C) Several of the recent BOFT investigations based on
our export control demarches have yielded similar results:
That the machine tools were not on the SHTC lists, that the
customer was not on prohibited end-user lists, that no
license was therefore required, and no law violated.
However, Taiwan's catch-all provisions which became effective
January 2004 state that an export control license is required
whenever the exports are to a "high-risk" area (defined as
Iran, Iraq, Libya, China, Cuba, Syria, Sudan, and North
Korea) and the item could (keneng) be used to produce
nuclear, chemical, biological weapons, weapons of mass
destruction, or be used in the production of military
weapons.

(C) As we read it, Taiwan's catch-all regulation indicates
that before the She Hong Company can export a machine tools
to Syria that it knows could be used to produce weapons of
mass destruction (or other military weapon),it must apply
for an export license. The fact that She Hong included a
stipulation against WMD use shows it knew the machines could
be used to produce weapons. There is clearly a conflict
between the expressions of commitment to strict export
control and the extreme reluctance to enforce current laws.

Measures of Performance are Needed
--------------


5. (C) In order to address this apparent contradiction
between the high-level commitments articulated in response to
our recent demarche and the inadequate implementation as seen
in these latest investigation results, AIT/T believes that it
would be useful to set out some benchmarks for Taiwan
performance on export control. This would provide a way to
clarify objectives and measure Taiwan's progress toward those
objectives. AIT/T suggests the following actions as possible
milestones for Taiwan progress on export control and concrete
evidence of Taiwan commitment to export control:

-- Taiwan's Ministry of Economic Affairs (MOEA) should issue
a statement to clarify Taiwan's catch-all regulation so that
government agencies and industry fully understand the
requirement for an export license for all exports to
high-risk countries of items that can be used in the
production of WMD or military weapons.
-- MOEA should immediately impose the administrative
sanctions indicated under Taiwan's Trade Act on companies
guilty of major export control violations, including
violations of catch-all regulation where the item exported is
not on SHTC lists but because of the end-user or destination
of the commodity, and its potential use to produce military
weapons, the export requires a license. AIT/T suggests that
sanctions begin with the She Hong Company.
-- MOEA should impose the administrative sanctions on
companies that present items for export without the required
export permit.
-- Taiwan agencies should determine how current laws could be
used to limit the flow of technology to high-risk countries
instead of waiting for new legislation. The catch-all
regulation did not require new legislation. It is unclear
why protection for sensitive technologies should require
additional legislation. MOEA could simply issue a notice
broadened the coverage of export control regulations to
include technologies involved in WMD or weapons production.
-- MOEA should expand the scope of export control
jurisdiction to cover proliferation and arms brokering by
Taiwan entities outside of Taiwan.
-- MOEA should establish re-export controls on exported
Taiwan items.


6. (C) While Taiwan should demonstrate its commitment to
export control through actions, at the same time, U.S.
agencies can contribute to the success of Taiwan's efforts in
a number of ways:

-- AIT should meet with legislators to explain USG goals
behind export control. Before the meeting, AIT needs to be
clear on the key points, such as detailed elements of a
Technology Protection Law.
-- AIT should, as requested by Foreign Minister Mark Chen,
provide a sample Technology Protection Law that could be used
as a model for their own law (which has been renamed the
"Sensitive, Scientific, and Technical Protection Law"
(minggan kexue jishu baohu fa).
-- The MOEA Bureau of Foreign Trade (BOFT) continues to urge
that the remaining five EXBS training courses be scheduled
soon.
-- BOFT has repeatedly asked for a U.S. team to look into a
more efficient way for Taiwan to verify end users with U.S.
agencies (mentioned again during Asher's February visit.)
-- AIT should send representatives to participate in the BOFT
export control seminars for machine tool industry.

Comment
--------------


7. (C) The USG has heard expressions of Taiwan's commitment
to strict export control from many of the top officials in
the government, including the President and Premier. It is
time for Taiwan to prove this commitment with action. AIT
will begin the process by calling on MOEA and NSC to ask that
administrative sanctions be imposed on those companies that
exported items that could be used to produce weapons to
high-risk countries.

PAAL