EXTRANCHECK: PRE-LICENSE CHECK: SHIU

UNCLAS HONG KONG 000440 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: SHIU CHEUNG HARDWARE CO. LTD. REF: A) USDOC 01189 B) EXP.LIC. D370973 ¶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) accompanied by Commercial Assistant Sandy Lai conducted a pre-license check (PLC) at Shiu Cheung Hardware Co. Ltd. 338-340 Lai Chi Kok Road, Kowloon, Hong Kong (Shiu Cheung Hardware). The purpose of the PLC was to determine the suitability of Shiu Cheung Hardware to be the recipient of specialty aluminum rods (ECCN 1C202) valued at approximately USD 2 million. The items are controlled for nuclear nonproliferation (NP) reasons. The license applicant is Hadco Metal Trading Co. LLC of Jamaica, New York (Hadco). ¶3. According to the Hong Kong Companies Registry, Shiu Cheung Hardware has been in existence since September 1995. Five members of the Fung family (all Hong Kong residents) are listed as directors. The registered address is the primary business location of the company. The share capital of the company is the Hong Kong equivalent of approximately USD 1.2 million. ¶4. On February 14, 2006, the ECO and Commercial Assistant visited Shiu Cheung Hardware at the address above and met with Mr. M. Fung, Managing Director and Director Stanley Fung. Mr. M. Fung stated that Shiu Cheung Hardware is a trading company specializing in hardware, tools, steel and aluminum titanium alloys. Mr. M. Fung stated that the company has been in existence since 1964 (though its marketing materials indicate that it has been incorporated under its present name since 1996). ¶5. Mr. M. Fung stated that Shiu Cheung Hardware intends to purchase the aluminum rods that are subject of the check for stock to supply Shiu Cheng's usual customers. Those customers typically purchase cut portions of the aluminum rods. Mr. M. Fung produced various invoices for past transactions with Hong Kong based companies including ASM Asia Ltd. (www.asm.com) and Golden Casting Company (www.goldencasting.com.hk). He stated that these rods are used primarily for casting purposes to make moldings for plastics and other applications. He stressed that the customers for the aluminum rods are only in Hong Kong. By way of an explanation, he stated that it is easier to collect payment from Hong Kong customers. ¶6. Messrs. Fung and Fung stated that they understood that these items should only be sold to legitimate end-users. At the same time, it was clear that they were not familiar with U.S. export controls on the items nor were they familiar with comparable Hong Kong export control rules. The ECO provided the Fungs with BIS information on reexport controls as well as contact information for the Trade and Industry Department in Hong Kong, which administers Hong Kong's export control system. ¶7. Based on the information in reftel A (namely that Shiu Cheung Hardware does not have a licensing history with BIS),it appears that the exporter (Hadco) may not have applied for export licenses in the past for shipments of comparable aluminum rods when such licenses may have been required. The ECO recommends that BIS review its records and consider reaching out to Hadco on this matter. ¶8. Shiu Cheung Hardware was very forthcoming during the PLC visit. Messrs. Fung and Fung provided information on the intended use of the items (distribution to customers in Hong Kong) as well as background on Shiu Cheung Hardware. The ECO recommends that this PLC be considered Favorable. Cunningham