SUMMARY OF THE ELEVENTH ROUND OF U.S.-HONG KONG

C O N F I D E N T I A L SECTION 01 OF 05 HONG KONG 002378

SIPDIS

SIPDIS
NOFORN

STATE FOR EAP/CM AND NP/ECS
USDOC FOR U/S MCCORMICK AND THAUSER, A/S JACKSON

E.O. 12958: DECL: 06/08/2031
TAGS: ETTC EBMGT BEXP PTER HK
SUBJECT: SUMMARY OF THE ELEVENTH ROUND OF U.S.-HONG KONG
BILATERAL EXPORT CONTROL DISCUSSIONS

REF: HONG KONG 2317

Classified By: SIMON SCHUCHAT, E/P CHIEF. REASONS: 1.4 (B,D,E).


1. (C) ON 16-18 MAY 2006, THE HONG KONG TRADE AND INDUSTRY
DEPARTMENT (TID) AND CUSTOMS AND EXCISE (CUSTOMS) DEPARTMENT
HOSTED THE U.S. DEPARTMENT OF COMMERCE BUREAU OF INDUSTRY AND
SECURITY (BIS) FOR THE 11TH U.S. ) HONG KONG BILATERAL
EXPORT CONTROL DISCUSSIONS UNDER THE 1997 AGREED MINUTE. THE
AGREED MINUTE ) SIGNED BY THEN SECRETARY OF COMMERCE DALEY
AND HONG KONG TRADE SECRETARY DENISE YUE ) CALLS FOR REGULAR
DISCUSSIONS TO EXCHANGE INFORMATION ON EXPORT CONTROLS AND
ENHANCE COOPERATION. UNDER SECRETARY OF COMMERCE FOR
INDUSTRY AND SECURITY DAVID MCCORMICK and TID
DIRECTOR-GENERAL RAYMOND YOUNG opened the discussions on May

16. Assistant secretary for export enforcement darryl w.
jackson and tid deputy director general clement leung chaired
the three-day talks, which included presentations on EXPORT
CONTROL UPDATES. the U.S. delegation toured HONG KONG,S
BOUNDARY CONTROL SYSTEMS INCLUDING LAND, PORT, AND AIRPORT.
END SUMMARY.

DAY ONE - VISIT TO KWAI CHUNG CONTAINER TERMINAL.


2. (C) AFTER A BRIEFING AT THE U.S. CONSULATE, ASSISTANT
SECRETARY FOR EXPORT ENFORCEMENT DARRYL JACKSON AND

SIPDIS
DELEGATION MET WITH HONG KONG CUSTOMS PORT AND MARITIME
COMMAND (PMC) OFFICIALS TO DISCUSS THE HONG KONG CUSTOMS
OPERATION AT THE KWAI CHUNG CONTAINER TERMINAL. PMC
OFFICIALS EXPLAINED THAT A TYPICAL CARGO EXAMINATION AND
CLEARANCE TOOK LESS THAN TWO DAYS. PMC OFFICIALS NOTED THAT,
IN 2005, IT EXAMINED 477 CONTAINERS, INVOLVING CONTROLLED
COMMODITIES SUCH AS CANNABIS, CIGARETTES, IVORY, AND
COUNTERFEIT GOODS. A/S JACKSON ALSO RECEIVED A BRIEFING ON
THE HONG KONG INTERNATIONAL TERMINAL'S INTEGRATED CARGO
INSPECTION SYSTEM (ICIS) AT THE HUTCHISON PORT
HOLDINGS-OPERATED TERMINAL.

DAY ONE - OPENING PLENARY


3. (C) TRADE AND INDUSTRY DEPARTMENT (TID) DIRECTOR-GENERAL
RAYMOND YOUNG CITED THE GROWING CONCERN about WEAPONS OF MASS
DESTRUCTION (WMD) AND THE NEED TO CONTINUE TO PURSUE EXPORT
CONTROL AGREEMENTS WITH ITS TRADING PARTNERS. AS A SEPARATE
CUSTOMS TERRITORY UNDER THE &ONE COUNTRY, TWO SYSTEMS8
PRINCIPLE, HONG KONG WAS COMMITTED TO A STRONG EXPORT CONTROL
SYSTEM. HONG KONG HAS COOPERATED CLOSELY WITH THE U.S. IN
THE PAST, WITH BOTH SIDES COMMITTED TO SHARING INFORMATION.
Young ALSO NOTED THE CLOSE COOPERATION tid had enjoyed WITH
THE U.S. EXPORT CONTROL OFFICER (ECO) IN HONG KONG AND LOOKED
FORWARD TO THE NEW ECO ARRIVING SUMMER 2006. BOTH
ENFORCEMENT AND PREVENTION WERE NECESSARY COMPONENTS OF A
COMPREHENSIVE EXPORT CONTROL POLICY; JOINT OUTREACH TO TWO
LOCAL UNIVERSITIES WAS A GOOD EXAMPLE. HE CONCLUDED BY
NOTING THE NEED TO MAINTAIN A CLOSE WORKING PARTNERSHIP WITH
THE U.S.


4. (C) UNDER SECRETARY OF COMMERCE FOR INDUSTRY AND SECURITY
david mccormick expressed appreciation for the candid and
collegial relationship between the U.S. and Hong Kong in the
area of strategic trade, allowing both sides to address
issues quickly and improve export control regimes. He added
that BIS was involved in several other activities aside from
investigations, such as studies on how to improve the U.S.
export control system, the Committee on Foreign Investments
in the U.S. (CFIUS),securing the U.S. defense industrial
base, and the President's Technology Leadership Agenda, which
governs foreign researchers' participation in U.S.-based
high-technology research. U/S MCCORMICK ALSO HIGHLIGHTED THE
FACT THAT HE OFTEN USES HONG KONG AS A MODEL FOR EXPORT
CONTROL WHEN SEEKING TO EXPAND EXPORT CONTROL MEASURES IN
OTHER COUNTRIES.


5. (C) Young replied that cooperation has deepened since the
U.S. and Hong Kong signed the bilateral export control

HONG KONG 00002378 002 OF 005


agreement in 1997. Unfortunately, those wanting to evade
export controls have ALSO become more sophisticated. several
factors WERE NEcessary TO MAINTAIN a healthy relationship.
The first was information exchange at the annual export
control discussions. The second was the need to review past
and future law enforcement needs. The third was that each
side must investigate independently potential violations.


6. (C) A/S JACKSON REVIEWED THE ROLE THE AGREED 1997 MINUTE
HAS PLAYED IN FOSTERING LEGITIMATE TRADE OVER THE PAST TEN
YEARS. JACKSON NOTED THAT WHILE THE TRADING PARTNERS WORKED
TOWARDS LEGITIMATE GOALS OF GOODWILL, THERE WERE OTHERS WHO
CONTINUED TO TRY TO CIRCUMVENT SUCH EFFORTS TO PURSUE THE
PROLIFERATION OF WMD. THIS REQUIRED MORE EXPORT CONTROL
VIGILANCE ON BOTH SIDES. A/S JACKSON STATED A COMPREHENSIVE
APPROACH ON INTERNATIONAL COOPERATION AND COLLABORATION WAS
IMPORTANT, BUT EQUALLY IMPORTANT WAS THE ABILITY TO ACT
INDEPENDENTLY ON INVESTIGATIONS. A/S JACKSON COMMENTED THAT
THE U.S. RELIED UPON HONG KONG TO INITIATE INVESTIGATIONS IN
THE EXPORT CONTROL ARENA AND THIS TYPE OF PRO-ACTIVE POLICY
WOULD PREEMPT VIOLATORS BEFORE THEY COMMITTED OFFENSES.

HONG KONG UPDATE AND LATEST DEVELOPMENTS


7. (C) TID DEPUTY DIRECTOR-GENERAL (DDG) LEUNG PROVIDED A
BRIEF UPDATE ON MAJOR DEVELOPMENTS IN THE HONG KONG EXPORT
CONTROL ARENA. HE CITED THE CURRENT LEGISLATIVE AMENDMENT
BEING REVIEWED IN THE HONG KONG LEGISLATIVE COUNCIL (LEGCO)
WHICH INCLUDED NEW ADDITIONS TO MULTILATERAL REGIME CONTROL
LISTS. THE DRAFT LAW WAS LIKELY TO BE ENACTED BY SUMMER

2006. leung ALSO UPDATED THE U.S. ON HONG KONG EFFORTS IN
THE INDUSTRIAL OUTREACH ARENA WHICH CONTINUED TO PROMOTE
INDIVIDUAL AWARENESS OF POSSIBLE EXPORT CONTROL VIOLATIONS
VIA SEMINARS AND BRIEFINGS TO LOCAL BUSINESSES AND
ORGANIZATIONS. HE NOTED THE TID COULD ONLY INTERPRET ITS OWN
LAWS AND STILL LACKED THE ABILITY TO INTERPRET U.S. LAWS
AUTHORITATIVELY. HE ALSO ADDED THAT THE USE OF A CUSTOMER
LIAISON GROUP FEEDBACK MECHANISM PROVIDED DURING THE
LICENSING PROCESS CONTINUES TO IMPROVE THE EXPORT CONTROL
PROCESS.


8. (C) IN THE AREA OF BILATERAL COOPERATION, leung NOTED THE
EMPHASIS ON TRADING PARTNERS' ABILITY TO SHARE INFORMATION
AND ENSURE that HONG KONG DOES NOT UNDERCUT CONTROL REGIMES
OF OTHER COUNTRIES. HE expressed APPRECIATION FOR A U.S.
DEPARTMENT OF ENERGY FUNDED COMMODITY IDENTIFICATION WORKSHOP
IN 2005. regarding ADDITIONAL BILATERAL COOPERATION,
TECHNICAL EXPERTS FROM OTHER COUNTRIES have WORKed FOR SHORT
PERIODS OF TIME AT TID, INCLUDing from THE U.S., AUSTRALIA,
JAPAN, AND THE UNITED KINGDOM. AN EXPERT IN INDUSTRIAL
OUTREACH WOULD BE SECONDED TO TID FROM JAPAN IN SUMMER 2006.
BROAD PARTICIPATION BY HONG KONG IN SEVERAL INTERNATIONAL
EVENTS were another indication of HONG KONG'S DESIRE TO
CONTINUE TO MAINTAIN ITS HIGH STANDARD OF CONTROL COMPLIANCE.

HONG KONG STRATEGIC CONTROL SYSTEM UPDATE


9. (C) TID ASSISTANT DIRECTOR-GENERAL ERICA NG BRIEFED THE
DELEGATION ON UPDATEs TO HONG KONG'S STRATEGIC CONTROL
SYSTEM. SHE NOTED UNDER THE "ONE COUNTRY TWO SYSTEMS"
PRINCIPLE AND AS A SEPARATE CUSTOMS TERRITORY AND AUTONOMOUS
TRADING ENTITY, HONG KONG CONTINUED TO COMPLY WITH HIGH
INTERNATIONAL STANDARDS OF CONTROL ON STRATEGIC COMMODITIES.
hong kong has a STRONG SELF-INTEREST in preserving ITS
EXCELLENT REPUTATION. ng REVIEWED HONG KONG'S FOUR PILLARS
OF EXPORT CONTROL: LEGISLATION, LICENSING, ENFORCEMENT, AND
INTERNATIONAL COOPERATION. IN THE LEGISLATIVE AREA, HONG
KONG CONTINUED TO MIRROR ITS CONTROL LISTS TO INTERNATIONAL
CONTROL REGIMES WITH ANNUAL AMENDMENTS. SHE UNDERSCORED HONG
KONG'S COMMITMENT TO CONTROL LICENSING NOT ONLY ON EXPORTS,
BUT ALSO IMPORTS, TRANSSHIPMENT, AND GOODS IN TRANSIT. KEY
COMPONENTS ALSO INCLUDED VERIFICATION OF "NO WMD END-USE"
PURPOSES AND THE "NO-UNDERCUTTING PRINCIPLE," BY WHICH HONG
KONG DOES NOT ALLOW A SHIPMENT THAT WOULD VIOLATE CONTROL
SYSTEMS OF TRADING PARTNERS.

HONG KONG 00002378 003 OF 005



DAY TWO ) U.S. BRIEFING ON LICENSING AND REGULATORY ISSUES
AND U.S./HONG KONG EXCHANGE ON LICENSING RELATED ISSUES


10. (C) DIRECTOR FOR OFFICE OF NATIONAL SECURITY AND
TECHNOLOGY TRANSFER CONTROLS BERNARD KRITZer presented on
U.S. EXPORT LICENSING TRENDS, NEW DEVELOPMENTS IN
MULTI-LATERAL EXPORT CONTROL REGIMES, PLANS FOR PROPOSED RULE
CHANGES, AND POSSIBLE CHANGES IN TRADE ARRANGEMENT WITH
CHINA. KRITZER PROVIDED A BROAD OVERVIEW OF EXPORT LICENSING
STATISTICS, INCLUDING REVIEW OF U.S. EXPORTS TO HONG KONG AND
CHINA AND PROCESSING TIMES FOR LICENSING APPLICATIONS.
PROCESSING TIMES FOR EXPORT LICENSE APPLICATIONS TO CHINA
WERE DECREASING BECAUSE OF INCREASED EFFORTS BY BIS
PERSONNEL, TRANSPARENCY WITH REGARDS TO APPLICATIONS
INCLUDING ADDITIONAL DETAILS AND MORE END-USE VISITS.
KRITZER ALSO DISCUSSED DETAILED APPROVAL AND DENIAL TRENDS IN
LICENSING OVER THE PAST THREE YEARS. ADDITIONAL STATISTICS
INCLUDED TOP 10 LICENSED EXPORTS BY VALUE.


11. (C) KRITZER BRIEFED ON EXPORT CONTROL REGIME
DEVELOPMENTS, COVERING THE WASSENAAR ARRANGEMENT, AUSTRALIA
GROUP, MISSILE TECHNOLOGY CONTROL REGIME, NUCLEAR SUPPLIERS
GROUP, AND CHEMICAL WEAPONS CONVENTION, reviewing VARIOUS
CHANGES TO EACH REGIME INCLUDING THE ADDITION OF NEW MEMBERS,
POLICY HIGHLIGHTS, AND NEAR-TERM GOALS FOR EACH REGIME. as
for MAJOR CHANGES TO U.S. EXPORT CONTROL POLICY, kritzer
HIGHLIGHTed AN UPCOMING PROPOSED RULE CHANGE IN MAY 2006
RELATING TO THE WASSENAAR CONVENTION CATCH-ALL. DDG LEUNG
APPRECIATED AN OFFER BY KRITZER TO BRIEF THE HONG KONG
ECONOMIC AND TRADE OFFICE IN WASHINGTON D.C. ONCE THE RULE IS
PROPOSED. DDG LEUNG STRESSED THE SCOPE AND COVERAGE OF THE
RULE WOULD BE OF PARTICULAR INTEREST. KRITZER described U.S.
CHANGES IN ITS EXPORT CONTROL POLICY WITH INDIA. FINALLY,
KRITZER BRIEFED ON UPCOMING CHANGES TO DEEMED EXPORTS.

EXCHANGE OF LICENSING DATA


12. (C) DDG LEUNG PROVIDED A/S JACKSON WITH HONG KONG
IMPORT/EXPORT DATA IN BOTH HARDCOPY AND ELECTRONIC FORMAT FOR
THE LAST SIX MONTHS OF 2005. FOLLOWING THE EXCHANGE,
ASSISTANT DIRECTOR-GENERAL NG gave A GENERAL OVERVIEW Of
LICENSING TRENDS IN 2005. in conclusion, DDG LEUNG said TID
WAS STRUGGLING WITH WHETHER HONG KONG SHOULD IMPLEMENT A
CLASS LICENSE SYSTEM TO MOVE AWAY FROM THE CURRENT STRINGENT
REQUIREMENTS FOR EACH ITEM TO BE LICENSED SEPARATELY. he
PLANNED TO PROCEED CAUTIOUSLY WITH ANY PLANS TO LIBERALIZE
HONG KONG'S EXPORT CONTROL POLICY AND WELCOMED COMMENTS FROM
A/S JACKSON. A/S JACKSON NOTED THAT THE CURRENT SYSTEM WAS
WORKING WELL, AND REITERATED THE U.S. WOULD BE AVAILABLE AT
ANY TIME TO ASSIST TID WITH EXAMINING CHANGES TO ITS EXPORT
CONTROL POLICY.


13. (C) A/S JACKSON PROVIDED DDG LEUNG WITH U.S. EXPORT
LICENSE APPLICATION AND WORLD-WIDE DENIAL DATA IN BOTH
HARDCOPY AND ELECTRONIC FORMAT FOR 2005 AND THE FIRST QUARTER
OF 2006. A/S JACKSON NOTED SEVERAL ADDITIONS TO THE DATA,
INCLUDING ADDRESSES OF CERTAIN HONG KONG BASED FIRMS FOR
INVESTIGATIVE PURPOSES AND THE INCLUSION OF EXPORT CONTROL
IDENTIFICATION NUMBERS. IN RESPONSE TO A QUESTION FroM
LEUNG, A/S JACKSON described HIS TESTIMONY to a congressional
commission, IN WHICH HE HAD affirmed that HONG KONG CONTINUED
TO HAVE A ROBUST AND TRANSPARENT EXPORT CONTROL SYSTEM. a/s
jackson did note that there are factions in washington, d.c.
that are concerned about the security of exports to hong
kong.

DAY 3 ) ENFORCEMENT AND OUTREACH ACTIVITIES EXCHANGE


14. (C) A/S JACKSON DISCUSSED RECENT TRENDS AND COOPERATIVE
EFFORTS IN U.S. ENFORCEMENT OF EXPORT CONTROL LAWS AND
REGULATIONS OVER THE PAST YEAR. THE HIGH NUMBER OF LICENSING
DATA EXCHANGES WAS HELPFUL AND THE U.S. CONTINUED TO SEEK
ENHANCED COOPERATION WITH HONG KONG ON SPECIFIC CASES. A/S
JACKSON REITERATED HIS DESIRE TO INFORM POLICY MAKERS IN

HONG KONG 00002378 004 OF 005


WASHINGTON D.C. THAT HONG KONG CONTINUED TO HAVE A ROBUST AND
TRANSPARENT EXPORT CONTROL SYSTEM THAT IS EFFECTIVE AND
PROACTIVE. HE ENCOURAGED TID TO CONTINUE TO PROVIDE LEADS TO
THE ECO IN HONG KONG. PROLIFERATION WAS CITED AS A WORLDWIDE
PROBLEM WITH GREATEST CONCERN THAT WMD COMMODITIES COULD END
UP IN AREAS OF CONCERN SUCH AS IRAN. HE ALSO REITERATED THE
IMPORTANCE ENFORCEMENT PLAYED AS ONE OF THE FOUR PILLARS OF
HONG KONG,S EXPORT CONTROL SYSTEM.


15. (C) ACTING ASSISTANT DIRECTOR FOR OPERATIONS JOHN
SONDERMAN PROVIDED AN OVERVIEW OF BIS ENFORCEMENT TRENDS
HIGHLIGHTING STATISTICS OF CRIMINAL CONVICTIONS, IMPOSITION
OF FINES, ADMINISTRATIVE PENALTIES, AND CIVIL PENALTIES
AGAINST U.S. FIRMS OVER THE PAST YEAR. HE ALSO DISCUSSED
BIS' CURRENT CASE INVENTORY OF 43 OPEN INVESTIGATIONS
INVOLVING 35 TRANSSHIPMENTS AND 8 DIRECT SHIPMENTS TO HONG
KONG. HE ALSO PROVIDED IN-DEPTH DETAIL ON TWO CASES
INVOLVING LITAMOS ELECTRONICs LIMITED AND SUNFORD TRADING
LIMITED, BOTH OF WHICH WERE SUSPECTED OF SHIPPING POTENTIALLY
CONTROLLED ITEMS TO AREAS OF CONCERN. SONDERMAN RECOMMENDED
A COORDINATED APPROACH ON BOTH CASES DETERMINE THE CONTROL
STATUS OF THE ITEMS IN QUESTION, AND OFFERED TO SHARE DATA
OBTAINED FROM U.S. COMPANIES. THERE ARE PLANS TO name
additional companies as related to sunford and subject them
to the existing denial order against sunford. SONDERMAN ALSO
RAISED THE OUTSTANDING MUTUAL LEGAL ASSISTANCE AGREEMENT
(MLAA) REQUEST RELATING TO SUNFORD TRADING LIMITED. DDG
LEUNG REPLIED THAT THE MLAA REQUEST WAS RECEIVED IN JULY 2005
AND, ACCORDING TO HONG KONG LAW, NEEDED BEIJING'S CLEARANCE.
the hkg HAD notified THE CENTRAL GOVERNMENT IMMEDIATELY.
LEUNG ACKNOWLEDGED THE DELAY, BUT HONG KONG COULD NOT RESPOND
UNTIL BEIJING INSTRUCTED IT TO DO SO. HE ACKNOWLEDGED THE
RECENT U.S. HONG KONG POLICY ACT REPORT ALSO MENTIONED THE
MLAA REQUEST AND ADDED "SOME THINGS TAKE LONGER THAN OTHERS."



16. (C) DDG LEUNG PROMISED that TID WOULD remain VIGOROUS IN
ITS ENFORCEMENT EFFORTS. he asked whether bis was sure that
LITAMOS ELECTRONICs LIMITED was trading CONTROLLED EQUIPMENT.
LEUNG WANTED TO WORK CLOSELY WITH THE U.S. to ensure LITAMOS
remained unaware that IT WAS BEING INVESTIGATED. SONDERMAN
replied that BIS was not sure whether litamos was trading
controlled items since bis had not yet approached U.S.
COMPANIES doing business WITH LITAMOS. U.S. firms, however,
WERE STILL NOT ALLOWED TO SHIP U.S. ORIGIN GOODS TO THE
SUSPECTED IRANIAN END-USER. DDG LEUNG OFFERED TO CONDUCT
DISCREET CHECKS ON THE FIRM'S BACKGROUND AND IMPORT/EXPORT
HISTORY IN AN EFFORT TO UNCOVER ITS PAST BUSINESS DEALINGS.
BOTH SIDES AGREED TO WORK THROUGH THE U.S. CONSULATE'S ECO
AND THROUGH THE ICE RepresentativeS AT THE CONSULATE.


17. (C) according to DDG LEUNG, the HKG DID NOT HAVE THE
LEGAL AUTHORITY TO LEVY ADMINISTRATIVE SANCTIONS, but Hong
KOng prosecuted SUSPECT VIOLATIONS in the courts, maintaining
A BALANCE OF POWERS BETWEEN THE JUDICIARY, EXECUTIVE, AND
LEGISLATIVE. CITING THE JUDICIARY,S NEED TO BE BETTER
INFORMED ON EXPORT CONTROLS, TID HAS BRIEFED HONG KONG
JUDGES. IN THE OPERATIONAL AREA, LEUNG APPRECIATED BRIEFINGS
AND DATA FROM THE U.S. AND OTHER TRADING PARTNERS ON EXPORT
CONTROL. LEUNG'S GOAL WAS TO MAKE HONG KONG'S EXPORT CONTROL
SYSTEM ONE IN WHICH PROLIFERATORS OR ILLICIT TRADERS WILL
VIEW AS TOO COSTLY OR RISKY TO CONDUCT ILLEGAL TRANSACTIONS.


18. (C) A/S JACKSON PROVIDED THE FINAL BRIEF OF UPDATES ON
END-USE CHECKS IN HONG KONG. A/S JACKSON DISCUSSED THE
RESULTS AND TRENDS FOR END USES CHECKS IN 2005 INCLUDING BOTH
PRE-LICENSE CHECKS (PLC) AND POST-SHIPMENT VERIFICATIONS
(PSV). TWO FIRMS WERE RECENTLY ADDED TO THE UNVERIFIED LIST,
PARRLAB AND TZH INTERNATIONAL. WHILE DISCUSSING ISSUES
OBSERVED DURING END-USE CHECKS, A/S JACKSON SAID THAT
COMPANIES SHOULD BE AWARE OF THE END USER. THE END USER MUST
BE INCLUDED ON THE LICENSE, AND THE U.S. CONTROLLED COMMODITY
SHOULD NOT BE SHIPPED TO AN HONG KONG ENTITY ITHOUT A
PHYSICAL PRESENCE IN HONG KONG.


HONG KONG 00002378 005 OF 005



19. (C) DDG LEUNG WAS APPRECIATIVE OF PRIOR NOTIFICATION BY
THE U.S. OF HONG KONG COMPANIES SUSPECTED OF EXPORT CONTROL
VIOLATIONS. THIS ADVANCE NOTICE REDUCED ELEMENTS OF
SURPRISE. DDG LEUNG WAS ALSO GRATEFUL FOR THE U.S. PROVISION
OF DATA ON END USE CHECKS AND REAFFIRMED TID SUPPORT FOR BOTH
PLC AND PSC CHECKS. LEUNG REQUESTED ADDITIONAL INFORMATION
ON PSV CHECKS THAT RESULTED IN THE DISCOVERY OF CONTROLLED
COMMODITIES BEING SHIPPED TO HONG KONG SINCE THESE SHIPMENTS
ALSO VIOLATE HONG KONG LAW. DDG LEUNG ALSO INFORMED A/S
JACKSON THAT THE HONG KONG GOVERNMENT WOULD SOON PROSECUTE
THE MITRON CASE.

CLOSING REMARKS


20. (C) DDG LEUNG RECONFIRMED that THE "ONE COUNTRY TWO
SYSTEMS" PRINCIPLE ALLOWED HONG KONG TO ENJOY AUTONOMY and
MAINTAIN ITS OWN EXPORT CONTROL LAWS, CUSTOMS PROCEDURES,
ENFORCEMENT, LICENSING, AND INTERNATIONAL COOPERATION
INITIATIVES. A/S JACKSON AND DELEGATION HAVE OBSERVED THIS
PRINCIPLE FIRST-HAND. LEUNG WISHED THAT "SKEPTICS" OF THIS
SYSTEM IN WASHINGTON WOULD JUDGE HONG KONG NOT BY THEIR
PRECONCEPTIONS BUT RATHER BY HONG KONG'S ACTIONS.
INTERNATIONAL COOPERATION WOULD ALSO demonstrate to OTHER
TRADING PARTNERS THAT A STRONG EXPORT CONTROL SYSTEM CAN
INCREASE LEGITIMATE TRADE AND DECREASE ILLICIT TRADE.
FINALLY, THE ANNUAL EXCHANGE CONTINUED TO BE THE BEST WAY FOR
BOTH SIDES TO EXCHANGE DATA, DISCUSS CASES, AND MAINTAIN
UPDATES ON EXPORT CONTROL REGIME CHANGES.


21. (C) A/S JACKSON ACKNOWLEDGED HONG KONG'S EFFORTS IN
ARRANGING A PRODUCTIVE SET OF MEETINGS AND WAS IMPRESSED WITH
HONG KONG'S SERIOUSNESS IN SAFEGUARDING LEGITIMATE TRADE. HE
EXPRESSED U.S. SUPPORT FOR COOPERATION AND ASSISTANCE TO HONG
KONG BY WORKING TOGETHER TO ENFORCE EXPORT CONTROLS INCLUDING
PROVIDING LEADS, DATA SHARING, AND UPDATING PROGRESS ON CASES.


22. (U) A/S JACKSON HAS CLEARED THIS CABLE.
Cunningham