PRE-LICENSE CHECK D372865 - WAVELAB TELECOM

S E C R E T BEIJING 003489 SIPDIS SIPDIS USDOC FOR 532/BIS/OEE/JSONDERMAN/TANDRUKONIS/LLAUCIUS USDOC FOR 532/BIS/OEA/BKRITZER/BBAKER USDOC FOR OIO/ADESSARAN/WZARIT SECSTATE FOR EAP/CM SECSTATE FOR EB/ESP GUANGZHOU FOR FCS/MMURPHY NSC/PROSTRAT US DEPT OF HOMELAND SECURITY FOR IMMIGRATION AND CUSTOMS ENFORCEMENT/STRATEGIC E.O. 12958: DNG: CO 05/23/2017 TAGS: BEXP CH ETRD ETTC PREL SUBJECT: PRE-LICENSE CHECK D372865 - WAVELAB TELECOM EQUIPMENT CO. LTD REF: USDOC 2722 (03/23/07) Classified By: Jeannette L. Chu, Export Control Attache, for reasons E. ¶O. 12598 1.5 (b)(d)(h) (U) Unauthorised disclosure of the information provided below is prohibited by Section 12(c) of the Export Administration Act. ¶1. (U) REFTEL requested a Pre-License Check end-use visit to determine the reliability and suitability of WAVELAB TELECOM EQUIPMENT CO LTD to receive controlled United States goods and technology. BIS License Application D372865 was submitted by WAVELAB INC., 12007 Sunrise Valley Drive, Suite 3, Reston, Virginia 20191 (703/860-3522). The commodities sought are 4500 13-17 GHZ KU bank 2W HPA (4 stage) gallium arsenide microcircuits, manufactured by TRIQUINT SEMICONDUCTOR, to be used as power amplifiers in the production of indoor/outdoor units (IDU/ODU) for point-to-point digital microwave telecommunications systems. These commodities are classified as ECCN 3A001, valued at $10,350, and controlled for national security reasons. ¶2. (U) On or about March 26, 2007, ECO requested that the Department of Mechanical-Electronic and High Technology Industries of the Ministry of Commerce (MOFCOM) arrange a Pre-License Check to WAVELAB TELECOM EQUIPMENT CO LTD in accordance with the Exchange of Letters on End-Use Visit Understanding. On May 14, 2007, MOFCOM scheduled this visit for May 17, 2007. ¶3. (U) On May 17, 2007, ECO, accompanied by MOFCOM official WEI Jie and several officials from the Guangzhou Foreign Trade Bureau, conducted a site visit at WAVELAB TELECOM EQUIPMENT CO LTD, No. 6 Jinbi Road, Guangzhou Economic and Technological Development District, Guangzhou, Guangdong Province, China, and met with BING Qiu, General Manager, and Hedy HE, Assistant to the General Manager. During this PLC, Mr. BING disclosed that he is a U.S. citizen. ¶4. (U) Mr. BING stated that WAVELAB TELECOM EQUIPMENT (GZ) CO LTD ("WAVELAB GZ") is a manufacturing subsidiary of WAVELAB HOLDING LTD, which is a U.S. company headquartered in Reston, Virginia. WAVELAB HOLDINGS was established in 2002 and WAVELAB GZ was established in 2004 with 69 employees from China, Canada and the United States. (COMMENT: COMBA TELECOMMUNICATIONS acquired majority ownership of WAVELAB HOLDINGS in 2003 and WAVELAB GZ is co-located with COMBA TELECOMMUNICATIONS.) ¶5. (U) Mr. BING provided ECO with a hard-copy of a Powerpoint presentation describing WAVELAB's activities as follows: WAVELAB produces die and wire bonders, plasma cleaners, production test equipment, SMT machines, and outdoor units (ODUs) for microwave digital point-to-point teleommunications systems in commercial applications. The ODU designs are based on FCC and ETSI regulations. Model GSA2503 operates in ITU frequencies ITU-RF.636 for 16 GHz and ITU-RF.497 for 13GHz. Other ITU frequencies are ITU-RF.383-387, 595 and 637. Mr. DING also provided ECO with hard-copies of WAVELAB's ODU lock diagram and chart showing maximum percentage bandwidth for each product. Commercial applications for the ODUs include GSM/PCS cellular network backhaul and virtual private networks. Current customers include CHINA MOBILE-GUANGDONG, CHINA UNICOM-HAINAN, CHINA TELECOM-GUANGDONG and SPICE COMMUNICATIONS PVT LTD in New Delhi, India. WAVELAB has also sold products for telecommunications use in Tianjin and Hunan. Mr. BING denied any military end-uses or end-users for WAVELAB's products. ¶6. (U) ECO toured the clean room production facility at WAVELAB GZ and observed 30GHz and 60GHz microcircuit boards being assembled, wire bonding and die bonding, and integration of IC chips onto circuit boards. ECO observed work order forms attached to each product and noted that the work order form is used to document each stage of production with the name of the responsible employee and date that work is performed. ECO toured the supply room, which is part of the production facility but monitored by one person with key access. Electronic components were stored on marked shelves in a climate-controlled cabinet. (COMMENT: On March 23, 2007, Hedy HE e-mailed ECO to advised that WAVELAB GZ has purchased a separate climate-controlled cabinet for use as designated storage for U.S. export-controlled items and included a digital photograph of this cabinet.) ¶7. (U) Mr. BING advised ECO that in April 2007 WAVELAB HOLDINGS' CEO, WALTER ZHANG (ZHANG Guobao),met with BIS Licensing Officer Brian Baker and provided information in support of this license application. Mr. BING also provided ECO with a copy of a letter responding to additional questions from LO Baker regarding end-use justification, customer list, and quantities of ODU/IDU to be supplied to each customer. (COMMENT: ECO was not advised of contact between the license applicant and LO Baker despite e-mail exchanges with OEA prior to this PLC.) ¶8. (U) ECO reviewed with Mr. BING possible license conditions that may be imposed as well as potential requirements to obtain re-export licenses for controlled commodities shipped to other locations (e.g., SPICE COMMUNICATIONS in India). ECO also directed Mr. BING to the BIS website, noting in particular upcoming seminars on U.S. export controls. Mr. BING assured ECO of WAVELAB's commitment to full compliance with any export license conditions, promised to institute enhanced inventory control measures and guard against any military end-use. ¶9. (S/NF) ADDITIONAL INFORMATION: Subsequent to this PLC, ECO was contacted by DTSA via SIPRENET. DTSA raised specific concerns regarding purchase orders and inventory control measures. On May 21, 2007, ECO contacted Mr. DING telephonically and confirmed that WAVELAB GZ does not currently have any purchase orders for ODU/IDUs. Mr. DING stated that WAVELAB's export license application was based upon projections of future sales, noting that they would be required to ship finished product within a matter of weeks of receiving an order; thus, it would be necessary for WAVELB GZ to have the microcircuits on hand in order to meet production commitments. Mr. DING further stated that if the ODU/IDUs were not purchased immediately, they would remain in the inventory of WAVELAB GZ in segregated storage, clearly identified as having U.S. export controlled components. (COMMENT: ECO notes that REFTEL and PLC guidance specifically state that firm orders are not/NOT required in order to process an export license application.) Mr. DING stated that in 2005 WAVELAB sold approximately 1000 pieces contained U.S. export-controlled microcircuits to CHINA MOBILE, noting that TRIQUINT SEMICONDUCTOR did not inform WAVELAB of the need to obtain a U.S. export license from IBS. WAVELAB has sold approximately 1000 SDH and PDH ODUs to CHINA MOBILE, CHINA UNICOM and CHINA TELECOM, all in the 13 to 15 GHz range. In 2006 WAVELAB sold approximately 1000 ODUs to SPICE TELECOM. (COMMENT: OEA did not advise ECO of DTSA interest in this license application despite e-mail exchanges prior to this PLC.) ¶10. (U) ADDITIONAL INFORMATION REGARDING COMBA TELECOMMUNICATIONS: ECO conducted Internet searches and found that COMBA TELECOMMUNICATIONS has established a research and development partnership with Tsinghua University. This R&D partnership is based at a Key Laboratory in Guangzhou and focuses on developing microwave communications products. OEA has advised ECO that there are no deemed export or technology transfer concerns relating to this R&D program. COMBA TELECOMMUNICATIONS is listed on the Hong Kong Stock Exchange. Mr. ZHANG Guobao a/k/a Walter ZHANG, CEO of WAVELAB HOLDINGS, is also on the Board of Directors for COMBA TELECOMMUNICATIONS. ¶11. (U) RECOMMENDATION - FAVOURABLE. ECO found Mr. DING to be forthcoming and cooperative throughout the PLC process, nd eager to comply with any possible export license conditions. Per May 14, 2007 e-mail from LLAUCIUS, ECO notes interes by OEE/WAFO. Accordingly, ECO seeks OEE assistance in transferring a copy of this cable to S/A Chris TAFE at WAFO. PICUTTA PICCUTA