EXTRANCHECK: POST SHIPMENT VERIFICATION: TECT ELECTRONICS

UNCLAS HONG KONG 002232 SIPDIS USDOC FOR 532/OEA/LHINES/DFARROW USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS BEIJING FOR FCS JEANETTE CHU SIPDIS E.O. 12958: N/A TAGS: BMGT BEXP HK ETRD ETTC SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: TECT ELECTRONICS REF: A) USDOC 05826 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 post shipment verification (PSV) at Tect Electronics, Flat 811, 8/F, Hing Wah Center, 82084 Tokwawan Road, Kowloon, Hong Kong (Tect). The items in question are three high power broadband solid state power amplifiers exported to Tect on or about April 7, 2007 and valued at USD 12,000. On the applicable shippers export declaration (SED),these items are classified as 3A001 and are most likely controlled for national security (NS) reasons. The ECO notes that in certain circumstances, items that fall into the applicable ECCN (3A001) may be exported or reexported to mainland China without a license, particularly where they are destined for civil use. However, in other circumstances, 3A001 items require a license to mainland China regardless of end-use. This difference is dependant on the ECCN subcategory into which the applicable items fall. The exporter was Aethercomm Inc. of San Marcos, California (Aethercomm). ¶3. Tect is not included in the Hong Kong Companies Registry as it is not an incorporated entity. According to the Hong Kong Inland Revenue Department Business Registration Office, Tect is a sole proprietorship and has been in existence since 1999. The owner is Hong Kong resident Lo, Kwong Yau with Hong Kong resident identity card number D2486947. The company has additional offices in Shanghai, Shenzhen and Beijing. Its web site (www.tect.com.hk) provides additional information including a long list of brands. Its web site also includes various pictures of fighter jets, tanks, satellites and warships, presumably illustrating applications for some of its products. ¶4. The ECO visited Tect at the address referenced above on June 27, 2007 and met with Ms. Connie Kong, Assistant to the CEO. The office is modest in size, typical for a small trading company in Hong Kong. Ms. Kong stated that Tect is a distributor of various electronic components with customers in Hong Kong, mainland China, Singapore, Malaysia and Taiwan. The company is based in Hong Kong with sales offices in Shenzhen and Shanghai. Ms. Kong further stated that Tect represents approximately 40 brands. The company's products are used in the telecommunications and semiconductor areas. Tect's suppliers are located in the United States, the United Kingdom, France, Israel and Korea. The location of customers is linked to the authorized sales areas provided by Tect's suppliers. For example, in some instances, Tect may sell products in Hong Kong and Singapore but not mainland China. ¶5. Ms. Kong stated that Tect is not always aware of the end use of the items it sells to Hong Kong companies. However, she stressed that Tect always discloses customer names and addresses to its suppliers. Where a license is required, Tect provides its suppliers with information about its customers so that those suppliers may apply for licenses, as appropriate. Ms. Kong stated that its suppliers rarely decline to supply certain Tect customers although she noted that an Israeli supplier had recently declined to provide a product to one of its customers. Kong further stated that some U.S. suppliers had declined to supply certain customers. Ms. Kong stated that when this occurs, it tends to happen at the early stage of discussions based on the customer name and the specifications of the products. This occurs for custom build and what she termed "special purpose" orders. The ECO stressed to Ms. Kong that Tect has an independent obligation to comply with U.S. export control rules and provided her with BIS guidance on reexport controls. ¶6. As to the specific transaction in question, Ms. Kong confirmed that Tect had received the items and provided them to Fomax International Limited in Hong Kong. It was the first order Tect had received from Fomax. According to the Hong Kong Companies Registry, Fomax has been in existence since 2001. It has the equivalent of USD 1200 in share capital and directors are listed as Hong Kong residents Cheung, Mei (resident identity card number P104011(5) and Hung, Yuen Chit (resident identity card number A821382(0). According to Ms. Kong, Fomax is a trading company in Hong Kong. Related documentation provided by OEA provides that the end-user for these items will be Chengdu Century Goldenbird Electronic Technology Limited and the end-use will be "satellite communication". ¶7. At the time visited, Tect appeared to be a suitable recipient of the commodities shipped (as reseller) since Tect cooperated with the PSV and provided all requested information concerning the final disposition of the applicable items. Tect is likewise familiar with and stressed its intent to comply with U.S. export control rules. At the same time, the ECO was not able to inspect the subject items as they had already been delivered to Tect's customer. Consistent with guidance on reporting of PSVs where the items cannot be physically inspected, the ECO recommends that this PSV be classified as Limited. The ECO further recommends that OEA determine whether the applicable items are eligible for license-free shipment to mainland China as this may have an impact on the final classification of this PSV.