MTAG: TRANS MERITS LATHES FROM TAIWAN

S E C R E T SECTION 01 OF 02 TAIPEI 000072

SIPDIS

SIPDIS

STATE FOR EAP/TC AND ISN/MTR

E.O. 12958: DECL: 01/11/2027
TAGS: ETTC PARM KNNP NK TW SN
SUBJECT: MTAG: TRANS MERITS LATHES FROM TAIWAN

REF: A. STATE 1077

B. STATE 1501

C. TAIPEI 17

D. SINGAPORE 27

Classified By: AIT Econ AC Timothy Neely, 1.4 B/C


1. (S) Summary: AIT Econ delivered ref A comments and ref B
demarche to Bureau of Foreign Trade (BOFT) export control
task force head Wally Su (Shi-hwa) on January 8, 2007. Su
provided initial results of the BOFT investigation into
precision lathes exported by Trans Merits and subsequently
seized by Singapore officials at U.S. request (ref C). Su
later provided initial results from the BOFT investigation of
ref B information on the Your Faith Trading Company. End
summary.

BOFT Gives Details on Trans Merits
--------------


2. (S) BOFT's Wally Su gave AIT Econ detailed information on
the ref C Trans Merits transaction including copies of the
export manifest showing the Directorate of yanmar Industrial
Planning as the end-user of the precision lathes, webpages of
the Myanmar Ministry of Industry showing the types of
products that might be manufactured by the lathes, detailed
specifications of the lathes indicating two-axis maximum
precision of 0.02 mm, bill of lading showing the Directorate
of Myanmar Industrial Planning as the consignee, and a copy
of the sales contract between Trans Merits and the
Directorate of Myanmar Industrial Planning. Su said it
appeared the lathes were not strategic high-tech commodities
(SHTC),that the end-user was not on any blacklist, and that
nothing uncovered so far indicated any violation of export
control regulations or laws. BOFT has forwarded the case to
the Industrial Technology Research Institute for a definitive
classification of the machines.

Interview with Trans Merits Chairman
-------------- -


3. (S) In spite of the lack of evidence of wrongdoing, Su
said it was still possible that Trans Merits knew the lathes
would be transferred to a North Korean entity. To explore
that possibility Su requested that Trans Merits Chairman Tsai
Hsien-tai come to the BOFT offices in Taipei to answer
questions on January 5. Su said that during the questioning
he asked Tsai repeatedly about any trade links between Trans
Merits and North Korean entities. Tsai admitted that he had
heard that "a couple of years ago" some of Trans Merits
exports to China were re-exported to North Korea. Since
then, Tsai said, Trans Merits has been cautious to avoid any
improper conduct.


4. (S) Su told AIT Econ that he had a positive impression of
Chairman Tsai as a conservative, cautious businessman of
about 60 years of age, who formally had worked for Taiwan
Customs, understood export regulations, seemed open and
complete in his answers, and sincere in his stated desire to
abide by regulations and cooperate in any investigation.


5. (S) According to Su, Tsai said that Trans Merits has been
doing business with the Directorate of Myanmar Industrial
Planning for several years and had previously exported
refrigerators and small electrical appliances to the
Directorate. Su noted that Trans Merits was a large,
reputable trading company that had sent two company
representatives to the BOFT outreach sessions on export
control in August 2006. Su said he still thought it might be
possible that the Directorate of Myanmar Industrial Planning
was planning to transfer the lathes to a North Korean entity,
but he did not believe the Trans Merits Chairman had
knowledge of any such arrangement.


6. (S) Su thanked AIT for the responses given in ref A.

TAIPEI 00000072 002 OF 002


Later, he reported to AIT that according to BOFT records,
from January-November 2006 the Your Faith Trading Company of
Tainan did not export any products.
YOUNG