TAIWAN: RESULTS OF BLUE LANTERN PRE-LICENSE CHECK ON

UNCLAS AIT TAIPEI 001975

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/TC, ISN/MTR, AND PM/DTCC FOR BLUE LANTERN COORDINATOR
MICHAEL ROMERO, AIT/W

E.O. 12958: N/A
TAGS: ETTC KOMC TW
SUBJECT: TAIWAN: RESULTS OF BLUE LANTERN PRE-LICENSE CHECK ON
APPLICATIONS 050054652 AND 050055297, AND POST-SHIPMENT CHECK ON
APPLICATION 050037854

REF: A. 2007 STATE 105206

B. 2007 AIT TAIPEI 1041

C. 2006 AIT TAIPEI 3583



1. (SBU) Per reftel A. request, AIT/T visited the foreign consignee,
Dong Chin Co., and contacted the end user, ROC Taiwan Navy - Naval
Magong Logistics Support Command Penghu Shipyard. Based on the site
visit and the information collected by AIT/T, transactions related
to pre-license check request appear to be legitimate. The contract
related to application number 050055297 has been cancelled by the
Taiwan Navy, however, due to lack of delivery by Dong Chin. AIT/T
confirmed receipt of the item subject to the post-shipment check by
the Taiwan Navy. AIT/T also confirmed the bona fides of Lieutenant
Commander Liang, Tao-hung

Liang, Tao-Hung


2. (SBU) AIT/T confirmed the bona fides of Liang, Tao-Hung, Lt.
Commander, Procurement Office, Taiwan R.O.C. Navy, Naval Magong
Logistics Support Command in Peng Hu.

Taiwan Navy


3. (SBU) AIT/T contacted Mr. Liang. Mr. Liang stated that Dong Chin
is a long-standing contractor with the Taiwan Navy. Mr. Liang
verified the contract numbers, items, and the end-uses of the items
as stated in the two pre-license checks requests (DTC number
050054652 for alarm switchboards, and DTC number 050055297 for VRC
antennas).

Dong Chin:


4. (SBU) On August 17, 2007, AIT/T officer visited Dong Chin in its
Kaohsiung City office located on No 665, Jio-Ru 2nd Rd., San Min
District, Kaohsiung City. The company has another office located at
No. 7, Lane 15, Ling Shen Rd., Magong City, Peng Hu, as indicated on
the license application. Peng Hu is also the place of registration
for Dong Chin. Dong Chin representatives stated the Taiwan Navy in
Peng Hu is its sole customer.


5. (SBU) AIT/T reviewed Dong Chin's contract with the Taiwan Navy
for the alarm switch board, Taiwan Navy's end-use statement, and
Dong Chin's purchase order with the U.S. supplier. The contract
number, commodity, and quantity matched on all documents.


6. (SBU) AIT/T reviewed Dong Chin's contract with the Taiwan Navy
for the antenna, Taiwan Navy's end-use statement, and Dong Chin's
purchase order with the U.S. supplier. The contract number,
commodity, and quantity matched on all documents. However, Dong
Chin officials stated that the due to Dong Chin's inability to
deliver this item within the contract time frame, the Taiwan Navy
cancelled this particular purchase order for AS-1729/VRC Antenna
(DTC License number 050055297.) AIT/T confirmed the cancellation of
the order with the Taiwan Navy.


7. (SBU) Dong Chin officials explained the storage and handling
procedure for items Dong Chin imports. First, items arrive in Dong
Chin's Kaohsiung office and are directly delivered to the Taiwan
Navy storage facility in Peng Hu for inspection; after the items are
inspected and accepted by the Taiwan Navy, they are then shipped to
the specific Taiwan Navy end-user warehouse for installation. AIT/T
confirmed this handling process with the Taiwan Navy.


8. (SBU) For the post-shipment check on license 050037854, Dong Chin
officials stated that the subject inverter was delivered to the
Taiwan Navy in April 2007. Dong Chin officials said it does not
keep copies of delivery receipts when goods are delivered to the
Taiwan Navy. AIT/T confirmed delivery of the inverter with the
Taiwan Navy and its use, and also confirmed with Navy officials that
companies that supply items for the Navy normally do not take
receipts of delivery when items are delivered directly to the Navy.
AIT/T obtained from the Taiwan Navy and reviewed the delivery note,
inspection report, and test results for the inverter. All
information reconciled.


9. (SBU) Dong Chin was established in Peng Hu in 2002 to take
advantage of a business investment tax incentive offered by the
county government. When it was first established, its primary
business was distribution of such items as general machinery,
electrical tools, precision instruments, painting materials, and
fire fighting equipment. In 2006, Dong Chin added import and
government contract as business lines. Dong Chin officials stated


that one of the reasons for adding government contract and import as
business lines was because its previous import request through
Likung failed. When asked if the U.S. supplier explained why the
previous license application was denied, Dong Chin officials stated
that the U.S. supplier did not provide an explanation.


10. (SBU) When asked to explain its relationship with Likung, Dong
Chin officials stated that Likung is a separate company with same
ownership as Dong Chin. Likung's primary business line is import.
Likung is registered and located at No 665, Jio-Ru 2nd Rd., San Min
District, Kaohsiung City.


11. (SBU) The company officials stated that two other companies,
Dong Yi and Tai Chuan also have the same ownership as Dong Chin and
Likung. Dong Yi and Tai Chuan are contractors with the Taiwan Navy.
All are owned by the Lu family and are co-located in Kaoshiung.


12. (SBU) AIT/T met with the following principals of the companies:

-Mr. Lu, Yo-Tsuen, the father
-Mr. Lu, Dong Ming, the brother
-Mrs. Lu, Yeh Yu, the mother

In addition to the family members who are also principals in the
businesses, the family has one full-time employee in its Kaoshiung
office. Mr. Lu, Dong Ming, splits his time between the Peng Hu and
Kaoshiung offices.

Lastly, Ms. Lu, Jia-Ling Rebecca, the daughter, who resides in Ohio,
United States, acts as a liaison between the companies and U.S.
suppliers.


14. (SBU) Dong Chin officials stated that they are aware of
restrictions on USML items, especially prohibitions against
unauthorized re-transfers and re-exports of such items.

REF B. 07 State 1041


15. (SBU) AIT/T reached Mr. Liang Tao-Hung through the phone number
on the license application. AIT/T confirmed bona fides of Mr. Liang
directly with the Taiwan Navy. The first time AIT/T called the
number, we experienced the same result; i.e., an older sounding
female who stated that there is no Mr. Liang. AIT/T called again
and asked for Mr. Liang using a slightly different way of
pronouncing his name. This time, AIT/T was able to contact Mr.
Liang. Also, AIT/T found out that the number on the license
application is a general number on Taiwan Navy's website to call for
information to bid on government contracts. AIT/T obtained a main
switchboard number and Mr. Liang's cell number both of which worked
as proper contact numbers for Mr. Liang.

REF C. 06 State 3583


16. (SBU) Based on information from AIT/T contacts and the site
visit, we believe Likung and Tung Yi (also Romanized as Dong Yi)
have the same ownership but have different roles in transactions;
Tung Yi bids on contracts with the Taiwan Navy, and Likung imports
the goods. It appears that when Mr. Liang of Taiwan Navy was
contacted, he may not have known of the bifurcation of duties by the
companies nor the relationship because he was new at his job.
(Note: This bifurcation of responsibilities is common practice among
small businesses in Taiwan. End note.) AIT/T obtained a copy of
Tung Yi (or Dong Yi) company registration with the Peng Hu County
government. Tung Yi however does not appear on BOFT website because
that website lists importers and exporters only. However, this new
information does not clarify the discrepancy on the quantity and
timing of the order by the Taiwan Navy noted in Reftel C.


YOUNG