EXTRANCHECK: POST SHIPMENT VERIFICATION: ZAND DYNASTY

UNCLAS HONG KONG 002683

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: POST SHIPMENT VERIFICATION: ZAND DYNASTY
COMPANY LTD.

REF: A) USDOC 07674

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) of Zand Dynasty Company Ltd.,
Unit 502, Block H, Sui Wo Court, Shatin, Hong Kong (Zand). The items
in question are gas turbine parts exported to Zand on or about May
21, 2007 and valued at USD 110,000. In reftel A, the items are
classified under export control classification number (ECCN) 9A001.
This ECCN is controlled for national security (NS) and missile
technology (MT) reasons and items falling within this ECCN would
require a license for export to Hong Kong. The ECO notes that the
U.S. exporter (Turbine Services Ltd. of Saratoga Springs, New York)
did not put an ECCN on the applicable shippers export declaration
(SED) and stated that the export could proceed NLR (no license
required).


3. Zand is a Hong Kong registered company established in 2003.
According to the Hong Kong Companies Registry, its paid-up share
capital is the Hong Kong equivalent of USD 120. Directors are
listed as Hong Kong resident Tian, Xiao Hua and Hong Kong resident
Mr. Hassan Zand. The Hong Kong Companies Registry lists Ms. Tian's
personal residence as being located in the same building Zand (but
different block number).


4. A review of Zand's web site (http://zanddynasty.diytrade.com)
reveals that Mr. Zand travels frequently to the Middle East and the
United States. A review of Immigrations and Customs Enforcement
(ICE) databases reveals a Mr. Zand who is a likely match for the
Director of Zand Dynasty. The Mr. Zand in the ICE database is an
Iranian national and a U.S. permanent resident. According to the
Zand web site, Ms. Tian is active in the mainland China market and
has been doing business in Hong Kong for the past eight years. The
web site further states that the company specializes in exports,
imports, arranging outsourcing business for a wide range of
products. The web site advertises various gas turbine parts for
sale.


5. A web search of various phone numbers and contact details on the
Zand web site reveals that Zand is a trading company that has been
active in a range of product lines including pesticides, car parts,
iron ore and other products. Certain trade leads on various trading
sites including Alibaba include trade leads that require shipment of
products to Iran. Additionally, certain web references to Matlab
Kish Co. in Tehran, Iran list Ms. Tian's internet e-mail account in
their contact details.


6. On October 1, 2007, the ECO met with Ms. Tian at the offices of
FCS. Mr. Tian had requested the meeting occur at FCS offices since,
she stated, Zand is actually run from her home and she preferred not
to meet there. In e-mail correspondence prior to the meeting, Ms.
Tian stressed that the turbine parts were strictly for commercial
use in the power generation sector. Ms. Tian stated that Zand is a
trading company that both sources items internationally on behalf of
clients and also represents mainland Chinese manufacturers
internationally. She stated that its customers are primarily based
in China, Indonesia and the Middle East. She stated that the
company has had customers in Iran for agricultural products and
construction machinery. The company has two to three employees.
During a subsequent meeting on October 12, 2007 (described below),
Ms. Tian stated that Mr. Zand is somewhat involved in the business
but is also a professor at a Hong Kong university.


7. As to the particular items in question, Ms. Tian stated that
they were acquired as part of a new market that Zand would like to
enter. In particular, GE gas turbines are used for power generation
in mainland China. As a result, according to Ms. Tian, there is a
market demand for ready access to turbine spare parts for the China
market. However, Ms. Tian also stated that the China market is
moving from the GE frame 5 turbine (for which the items are suited)
to GE frame 9 turbines. Ms. Tian stated that Zand is responding to
a tender in Egypt for gas turbine spare parts for which the
applicable items would be suitable.


8. The ECO provided Ms. Tian with extensive information about U.S.
export and reexport controls. That information included guidance
from the Treasury Department's Office of Foreign Assets Control
(OFAC),which administers the U.S. embargo on trade with Iran. The
ECO stressed that U.S. persons (including lawful permanent
residents) may not conduct business with Iran (no matter the
technical parameters of the items). Ms. Tian committed to reviewing
the information closely and to ensuring that Zand complies with U.S.
export and reexport controls.



9. On October 12, 2007, the ECO visited Tung Yue freight forwarders
at the Kerry Cargo Center in Hong Kong. The items were located at
this location in a larger wooden box. Ms. Tian requested that the
box be opened but the items inside were sealed inside plastic
packaging. Ms. Tian stated that it would not be appropriate to open
the packaging as purchasers would not buy the products once the
packaging had been opened. A review of the labels on the packaging
revealed that this packaging material is designed to act as water
vapor control.


10. The ECO recommends that OEA obtain an official commodity
classification for the items to better ascertain their control
status. With such commodity classification, the ECO may approach
the Hong Kong government concerning this matter since items
classified as ECCN 9A001 require a license for import into Hong Kong
as well as export from Hong Kong.


11. At the time visited, Zand appeared to be an unsuitable recipient
of the commodities shipped in light of its apparent dealings and
associations with Iran. ECO notes that while reexports of certain
low-level U.S. origin commodities to Iran by non-U.S. persons may be
allowed, U.S. nationals and permanent residents are severely
restricted from entering into such trade. The ECO recommends that
this PSV be considered Unfavorable.