EXTRANCHECK: PRE-LICENSE CHECK: KA SHUI MANUFACTORY CO

UNCLAS HONG KONG 004244 SIPDIS USDOC FOR 532/OEA/LHINES/DFARROW USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS SIPDIS E.O. 12958: N/A TAGS: BMGT BEXP HK ETRD ETTC SUBJECT: EXTRANCHECK: PRE-LICENSE CHECK: KA SHUI MANUFACTORY CO LTD. REF: A) USDOC 05073 ¶1. Unauthorized disclosure of the information provided below is prohibited by Section 12C of the Export Administration Act. ¶2. As per reftel A request and at the direction of the Office of Enforcement Analysis (OEA) of the USDOC Bureau of Industry and Security (BIS),Export Control Officer Philip Ankel (ECO),conducted a pre-license check at Ka Shui Manufactory Co. Ltd., 3/F EW International Tower 120 Texaco Road, Tsuen Wan, Hong Kong (Ka Shui). The purpose of the visit was to determine the suitability of Ka Shui to be a recipient of a nanoform 00 two-axis CNC contouring machine that is the subject of export license application D363135. The item (ECCN 2B001) is valued at USD $237,000 and is controlled for nuclear nonproliferation (NP) reasons. The license applicant is Precitech, Inc. of Keene, New Hampshire (Precitech). ¶3. On August 25, 2006, the ECO visited Ka Shui at the address above and met with Norman Chan, Director of Sales and Marketing and Olivia Chan from Ka Shui's purchasing department. Ka Shui is a well-known die casting company in Hong Kong and has been in operation since 1980 (see further information at www.kashui.com). The corporate headquarters are located in Hong Kong although production for various Ka Shui products presently occurs at two locations in China. The company makes a range of products including the casings for the IBM Thinkpad laptop computer and the exterior shell of various types of cell phones. ¶4. According to Mr. Chan, the contouring machine would be used to make lenses, principally for cell phones. Mr. Chan explained that Ka Shui customers have indicated that they would like components suppliers like Ka Shui to produce a greater proportion of the final product. The contouring machine would allow Ka Shui would satisfy this need of existing and prospective customers by, for example, using the machine to create lenses that Ka Shui could incorporate into the exterior shells of cell phones. ¶5. The actual production of the lenses is set to occur in Hong Kong at a facility owned by Ka Shui that is not presently being used. At the request of the ECO, Mr. Chan took the ECO to the proposed production site, which turned out to be former offices of Ka Shui. The proposed production site is located in an industrial building near to Ka Shui's corporate headquarters. The site included Ka Shui logos on the door and walls but was clearly not presently in use. Mr. Chan stated that once he has a clearer idea when Ka Shui will obtain the machine, he will prepare the location for use in production of lenses (the space was modest -perhaps 500-1000 square feet). ¶6. Mr. Chan stressed that he understood well the requirement that the machine remain in Hong Kong and offered to allow the ECO to conduct a site visit after the machine had been delivered. ¶7. At the time visited, Ka Shui appeared to be a suitable recipient of the subject controlled items since it cooperated fully with the PLC and provided substantial information on Ka Shui's proposed use of the item in Hong Kong. In addition, Ka Shui operates a line a business that is consistent with the potential use of the ordered item. The ECO recommends that this PLC be classified as Favorable. Cunningham