EMBASSY MEETING WITH ISNA-SANCTIONED TARGET

S E C R E T KUALA LUMPUR 001478

SIPDIS

SIPDIS

STATE FOR EAP/MTS AND ISN
SINGAPORE FOR DHS/ICE

E.O. 12958: DECL: 10/02/2027
TAGS: PARM PREL ETTC IR MY
SUBJECT: EMBASSY MEETING WITH ISNA-SANCTIONED TARGET
AIRFREIGHT, SEPTEMBER 26

REF: A. STATE 48862

B. STATE 40030

C. 06 STATE 203597

D. KUALA LUMPUR 751

E. KUALA LUMPUR 652

F. KUALA LUMPUR 44

Classified By: Political Section Chief Mark D. Clark, reasons 1.4 (b, c
, d).

Summary
--------------


1. (S/REL MALAYSIA) Polchief and econoff met with U.S.
ISNA-sanctioned Malaysian firm Target Airfreight on September
26, in a meeting set up by the Malaysian Foreign Ministry.
Target executives confirmed they shipped helicopter parts to
Iran on March 31, 2004, at the request of an Indonesian firm,
Aviotech Rotables. They provided us with documentation
regarding the shipment. Target's managing director noted
that Malaysian police had thoroughly questioned him in
response to a U.S. request for Malaysia to investigate. In
response to Target's request for assistance from Aviotech in
the face of U.S. sanctions, Aviotech's director in Jakarta
replied in June 2007 that the shipment did not violate
Malaysian or Indonesian law. Target's director said he did
not have knowledge of similar shipments to Iran, but would
reconfirm this (the April 2007 round of U.S. sanctions
against Target related to December 2004 and January 2005
shipment of U.S. aircraft parts to Iran). We will forward
the complete documentation from Target to the Department.
End Summary.


2. (SBU) Polchief and econoff met with the Managing Director
of Target Airfreight, Mr. Cheng Hock Seng (aka H.S. Cheng,
DOB 3/20/56),and his Kuala Lumpur Branch Manager, Ms.
Marfuah binti Mohd Kassim (DOB 1/23/62),on September 26 at
the Embassy, in a meeting facilitated by the Malaysian
Foreign Ministry. The U.S. imposed sanctions on Target
Airfreight/Malaysia under provisions of the Iran-Syria
Nonproliferation Act (ISNA) in December 2006 and again in
April 2007 (reftels). Polchief opened the meeting by noting
that the U.S. Government takes seriously violations of our
laws on exports to Iran and Syria, and such actions had
resulted in criminal prosecutions and convictions in the
United States. Even though certain trade with Iran may not
violate Malaysian statutes, U.S. law provides for sanctions
against foreign entities when there is credible information
they have transferred items to Iran or Syria from
international and U.S. control lists. Polchief handed Cheng
the two Federal notices on sanctions determinations from
December 2006 and April 2007, and explained that we could not
provide further details on the activities that led to the
sanctions against Target.


3. (SBU) Cheng admitted that Target shipped helicopter spare
parts from Kuala Lumpur International Airport (KLIA) to
Teheran Mehrabad Airport on behalf of an Indonesian firm,
Aviotech Rotables, on March 31, 2004. Cheng provided copies
of related documents, including the airway bill; packing
list; letter of credit; Target's invoice of the shipment;
email correspondence between Target and Aviotech Rotables;
and a chronology of events related to the shipment. Iran's
Bank Sepah served as the consignee for the shipment and
issued the letter of credit for the amount of USD 501,723.
The packing list indicates the shipment contained nine
nozzles and were sold to Iran Aircraft Industries.


4. (SBU) Cheng stated that his company was not aware it had
violated U.S. law when it accepted and completed the
airfreight shipment in 2004. Cheng explained that his
company received the aircraft spare parts from Jakarta via
UPS courier service. Target's involvement was limited to
issuing another airway bill on Iran Air (due to the letter of
credit's requirements for a direct shipment to Iran) and also
handling Malaysian customs formalities. In June 2007 Cheng
emailed to Aviotech Rotables in Jakarta for advice on
clearing Target's name. Aviotech director Ismail Razak
replied that the shipment did not violate Malaysian or
Indonesian laws.


5. (SBU) Cheng noted that Malaysian police had questioned
him thoroughly three times in January 2007. The police
explained that they were acting in response to the U.S.
Government's request for an investigation. Due to
Target/Malaysia's concern for its reputation stemming from

the public U.S. sanctions and the implications for its
franchise headquarters in the U.S., Target had decided not to
accept future shipments to Iran. Cheng hoped that the
presentation of Target's information would serve to clear the
company's name with the U.S. Government and remove the
sanctions.


6. (SBU) Polchief asked if Cheng was aware of other Target
shipments to Iran of a similar nature. We pointed out that
Target was the subject of two sanctions determinations,
December 2006 and April 2007, which would imply more than one
activity in violation of U.S. law. Cheng said he was unaware
of any other similar shipments, but would audit his files to
be sure and share his findings, if any, with the Embassy.


7. (S/REL MALAYSIA) Note: The April 2007 sanctions
determination related to shipment of F-5 aircraft engine
components to Iran in December 2004 and January 2005 (ref B),
and not the March 2004 shipment of helicopter parts which
Target documented in our meeting. End Note.


8. (SBU) Polchief said the Embassy would forward the
documents provided by Target to the State Department, but did
not commit to any U.S. Government response. We have provided
copies of the documents to relevant Embassy offices and will
pouch the document set to EAP/MTS/Mike Taylor.

KEITH