EXTRANCHECK: PRE-LICENSE CHECK: TRONIC

UNCLAS HONG KONG 000971

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: TRONIC
TECHNOLOGY NETWORK (HK) CO. LTD.

REF: A) USDOC 00754

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 Tronic Technology Network (HK) Co. Ltd.,
Unit 2-3 Hope Sea Industrial Centre No. 22-24, Lam
Hing Street, Kowloon Bay, Hong Kong (Tronic). The
items in question are two pulse generators, valued at
USD 35,900. The export control classification number
(ECCN) for these items is 3A230. Items classified as
3A230 are controlled for nuclear nonproliferation
reasons and require a license for export to Hong
Kong. The license applicant is El-Pax, Inc. of
Burlingame, California (El-Pax). The Hong Kong
purchaser of the items is Goodwell Microelectronics
Limited (Goodwell) while Tronic is listed on the
license application as the ultimate consignee.


3. According to the Hong Kong Companies Registry,
Tronic has been in existence since April of 2000 and
has only nominal paid-in capital. Directors of
Tronic are listed as mainland Chinese national Zugang
Lai as well as Hong Kong identity card holder Ha Lo.
Collocated at the same address are three additional
companies, China Oriental Express Company Limited
(established in 1994)(China Oriental),Dragon Well
Transportation Limited (established in 1998)(Dragon
Well),Oriental Resource International Development
Company Limited (established in 1997) (Oriental
Resource). Ms. Lo is a director of these three
additional companies as is Hong Kong identity card
holder Sheung Wing Hai. Oriental Resource has one
additional director, Hong Kong identity card holder,
Chi Kong Lau. All companies have only nominal paid-
in share capital.


4. Ms. Lo is listed in the Companies Registry as the
director in several additional companies in Hong Kong
including Action Technology (HK) Company Limited,
China Dragon Well Development (HK) Limited
(dissolved),Gori Electronic (HK) Company Limited,
Joint Express Transportation Limited and Konge
Industrial Development Company Limited (dissolved).
Chi Kong Lau is listed in the Companies Registry as
director in Amethyst Kingdom Company Limited, Huge
Loyal Investment Limited and June Just Company
Limited.


5. According to the Companies Registry, Goodwell
(Tronic's supplier and buyer from El-Pax) has nominal
paid-in capital. Its directors are Hui Yi Li and
Jian Heng Li, both mainland Chinese nationals.
Goodwell is collocated with Fiaco Microelectronics
(HK) Limited. A google search reveals that Fiaco is
apparently the parent company of El-Pax (the U.S.
exporter and export license applicant). A review of
the Tronic to Goodwell fax reveals that it is
addressed to Ms. Sindy Lau who is also listed as the
contact person for Fiaco (at the fax number listed
for Fiaco at www.fiaco.com).


6. The ECO, accompanied by Commercial Assistant
Sandy Lai, visited Tronic at the address referenced
above on March 5, 2007 and met with Ms. Ha (Phoebe)
Lo. Signage outside of the building lists the
tenants of the particular unit as China Oriental and
Dragon Well but makes no reference to Tronic. Ms. Lo
provided background on Tronic and its business and
the proposed end-use of the items. She stated that
Tronic has two shareholders and four staff persons
and is involved primarily in mobile phone accessories
trading as well as trading in the area of cables and
modems. Its clients are located in Hong Kong and
mainland China. Ms. Lo noted that shareholders in
Tronic are also shareholders in other companies
including Oriental Resource, Dragon Well and China
Oriental (referenced above).


7. When asked about the proposed use of the items,
Ms. Lo stated that they would be provided to Tronic's


client for IP TV cable testing. Ms. Lo did not have
a copy of the contract with Tronic's client on hand.
However, she did provide a copy of a fax dated
December 15, 2006 to Goodwell that references an
order for the items and Tronic's End-Use Certificate
(dated November 25, 2006) and BIS-711 (Statement by
Ultimate Consignee and Purchaser). In the BIS-711,
attached to the fax, Tronic marked the applicable box
relating to end-use stipulating that Tronic would be
the user of the items. Tronic further stated on the
form that the items would be used by Tronic in
quality inspection of cable and that the nature of
Tronic's business is "Research Etd." When later
asked by phone why Tronic had elected not to mark the
box stating that the items would be resold, Ms. Ho
stated that at the time she completed the form,
Tronic did not have a firm order in place. [ECO
Comment: This explanation is not entirely credible
since it is clear that it was never intended that
Tronic use the item. As such, it would have been
more appropriate to state the items were for resale,
regardless of whether there was a firm order in
place.]


8. By e-mail dated March 13, 2007, Ms. Ho stated
that the Hong Kong customer for the items is Ipma
Technology International Limited (HK) Co. (Ipma). On
March 15, 2007, Ms. Ho provided a contract between
Tronic and Ipma for the items dated December 12,

2006. It is worth noting that the sale price for
this transaction is USD 50,473 while the sale price
in the Goodwell to Tronic transaction is USD 43,890
and the value listed on the license application is
USD 35,910. According to the Companies Registry,
Ipma has been in existence since 2005 and has the
equivalent of USD 500,000 paid-in share capital. Its
director is Hong Kong identity card holder Man Bue
Loong. More information on Ipma's broadband and
telecommunications business can be found at
www.ipmaco.com.


9. On March 26, 2007, Ms. Vicky Lee, Marketing
Communication Officer of Ipma stated by phone that
Ipma had not placed the order claimed by Tronic.
Subsequently, on March 27, 2007, Ms. Josephine Or,
Manager for Product Marketing of Ipma called to say
that she was the more appropriate person to ascertain
whether an order existed. On April 4, 2007, she
stated that no such order existed.


10. The ECO recommends that this PLC of Tronic be
considered Unfavorable.
Sakaue