EXBS: TAIWAN MONTHLY REPORTING CABLE - DECEMBER 2007

UNCLAS AIT TAIPEI 000036 SIPDIS SENSITIVE SIPDIS DEPT FOR ISN/ECC - YWONG, ACHURCH, KCROUCH AND ROWEN DEPT FOR EAP/TC - SBREMNER DEPT FOR MTR - PDURHAM, SMIKOL, JMAYES, AND RPALMIERO CBP/INA FOR RWATT AND JGOUGE DEPT FOR ENERGY/NNSA FOR T. PERRY AND S. JONES E.O. 12958: N/A TAGS: ETTC MNUC PARM PREL KSTC KNNP TW SUBJECT: EXBS: TAIWAN MONTHLY REPORTING CABLE - DECEMBER 2007 ¶I. BROAD ITEMS OF INTEREST TO ADVISORS AND AGENCY MANAGERS: (SBU) None. II. COMPLETED ACTIONS FOR THE REPORTING PERIOD. ¶A. SITE ASSESSMENTS AND MEETINGS DURING REPORTING PERIOD: ¶1. (SBU) On December 11, the Export Control and Related Border Security (EXBS) Program Advisor met with Taiwan Ministry of Justice Investigation Bureau (MJIB) officials to get an update on export control cases. As part of MJIB's update, the EXBS Advisor received written summaries of closed and open cases as of December 2007. The following is a summary of the verbal and written updates. BEGIN SUMMARY CLOSED CASES ¶2. (SBU) Kuo Cheng-Chung (Kuo) and Lin Fang-Tusen (Lin), individually: In November 2004, Kuo, the individual in charge of Ching Hwee International Trading Company (Ching Hwee) located in Feng Yuan City, Taichung County, and Lin, a former employee of Ching Hwee, established SinaTek Equipment (SinaTek). In December 2005, Kuo and Lin traveled to Sheng Yang Machinery Corp. (Sheng Yang) located in Shen Yang Province, China, to arrange a bogus sale of a machining center to Shen Yang. The actual purchaser of the machining center was Ryonha Machinery J/V Corp. (Ryonha) located in North Korea. (Kuo had long-established business relationships with both Shen Yang and Ryonha.) Kuo placed the order with Leadwell Machine Co., a Taiwan company, to manufacture the machining center. In May 2006, Leadwell delivered the machining center to Ching Hwee. Kuo and Lin then resold the machining center to SinaTek. Kuo and Lin, through SinaTek, hired a customs broker to prepare the necessary export documents and submit them to Taichung Customs Bureau using documents provided by Shen Yang. The documents prepared by Shen Yang falsely stated that the machining center would be shipped to Dalien Harbor in China. On June 15, 2006, Kuo and Lin arranged for the machining center to be shipped from Taiwan to North Korea on Pong Hua, a North Korean flagged vessel. However, the shipment was seized before it left Taichung. At the time of the attempted shipment, neither Kuo nor Lin obtained the required permit from the Bureau of Foreign Trade (BOFT) of the Taiwan Ministry of Economic Affairs to export to North Korea. Both individuals received suspended sentences of six months imprisonment and were required to donate NTD 150, 000 (approximately USD 4,658) to designated charities. ¶3. (SBU) Wu Zhai-Zhao (Wu),individually, and Chanto Air Hydraulics Co., Ltd. (Chanto): On August 22, 2006, Wu, through Chanto, attempted to export air and pneumatic presses, items on Taiwan's Sensitive High Tech Commodity List, to Eadenegar Company in Iran, without the required BOFT authorization. Wu arranged for the presses to be shipped from Kaohsiung Harbor to Abbas, Iran, through Dubai, the United Arab Emirates. On September 27, 2007 the Prosecutors Office deferred prosecution of Wu and Chanto for one year with a payment of NTD 80,000 (approximately USD 2,484) by Wu. According to MJIB, this was the first offense by Wu and Wu showed great remorse for his action, both considered mitigating factors by the Prosecutors Office. OPEN CASES ¶4. (SBU) From March through September 2003, Johnson Trading & Engineering Co. (Johnson Trading) imported controlled items, including military-use standardized electronic chips, from the United States under the names of Opto Tech Corp., Chung Shan Institute of Science and Technology, and Aerospace Industrial Development Corp. Johnson Trading then exported these commodities from Taiwan to China without the required BOFT authorization. The MJIB referred the case to the Ban Chiao District Court Prosecutors Office for prosecution. The case is pending. ¶5. (SBU) In January 2007, C-TEK exported twelve sets of electric discharge machines, which have military applications, to Iran by falsely stating that the machines were destined for the Republic of Samoa and by providing incorrect tariff codes. In fact, the machines were destined for Bohr Corporation in Iran. The electric discharge machines were on Taiwan's Sensitive Commodity List and required export authorization from BOFT to export to Iran. The MJIB Taichung County Office began investigating the case in mid-March ¶2007. The case is pending in the Taichung Prosecutors Office. ¶6. (SBU) On or about November 24, 2006, Edda Industrial Co., Ltd. (Edda) exported to North Korea through China Y-Strainers, items on Taiwan's Sensitive Commodity List, without the required BOFT authorization. The MJIB Taipei Office began investigating Edda in mid-June 2007. The Y-Strainers, which could be used in nuclear programs, were exported from Keelung Harbor to Dalien, China, and then to Nan Pu, North Korea. The case has been referred to the Taipei District Prosecutors Office for prosecution. The case is pending. END SUMMARY ¶7. (U) In addition to the above cases, the following enforcement action against Royal Team Corporation appeared in the English-language Taipei Times on December 28. BEGIN ARTICLE Three businessmen indicted for illegal trade with North Korea: Taipei prosecutors yesterday indicted three businessmen on charges of violation of the Foreign Trade Act after their companies exported restricted products to North Korea. "North Korea was very persistent in its bid to develop nuclear weapons. The actions of the three defendants actually helped it to become a more dangerous threat to its neighbors," said prosecutor Chang Shu-hua in the indictment. Chang's remarks referred to Royal Team Corporation's (Chinese name of the company is Huayueh trading company) business with Korea Daespongsan Information Technology Exchange Corp of North Korea between August last year and July, despite the fact that North Korea is listed on the Ministry of Economic Affairs list of countries where trade in sensitive products that can be used for military purposes is prohibited. Prosecutors discovered that Royal Team Corp exported computer hard drives, DVD burners, aluminum, infrared binoculars, laser printers and laptops to the North Korean company. All the products were shipped via Macau for transfer to North Korea. Prosecutors said the products sold to North Korea could be used for military-related development or the production of advanced weapons. Royal Team Corp president Liu Ker-hua, general manager Liu Chen-yi and sales representative Chen Shu-chen all cooperated with prosecutors during questioning and admitted to the violations. Chang said that the three defendants violated Article 27 of the Foreign Trade Act and could face a potential sentence of up to two years and a fine of up to NT300,000(US$89,00). But since the three defendants do not have criminal records and as they promised prosecutors there would be no repeat of the violation in the future, Chang suggested in his indictment that judges suspend the defendants' sentences, meaning that the charges would be dropped if the defendants do not reoffend during the duration of the suspension. END ARTICLE ¶8. (SBU) On December 19, the EXBS Advisor met with the Kaoshiung Customs, the Kaoshiung Harbor Police, and the Kaoshiung Harbor Bureau. The main purposes for the meetings were to express appreciation for their support and attendance at EXBS programs and to seek information on the types of programs that would be most useful to Taiwan's enforcement personnel. The EXBS Advisor also met with the U.S. Container Security Initiative Team in Kaoshiung. ¶9. (SBU) On December 20, Economic Chief and the EXBS Advisor met with officials of BOFT. The first part of the meeting was with Wu Hsin-Hua (James),Deputy Director General of BOFT and staff. The second part of the meeting was with just Huang Chih-Peng, Director General of BOFT. During both parts of the meeting, the Advisor briefly explained EXBS goals in Taiwan and expressed gratitude for such high level attention and support for the training programs. The Advisor also informed BOFT that the EXBS focus for 2008 would be on programs related to industry awareness, such as the Internal Control Program and Denied Parties Screening Tool software developments. They seemed interested and impressed that EXBS would be able to fund such software developments. Both DDG Wu and DG Huang were familiar with EXBS and Gameplan objectives. They both conveyed continued support and appreciation for EXBS trainings conducted for Taiwan. ¶B. BLUE LANTERN: (U) On December 27, the EXBS advisor conducted a site visit pursuant to a Blue Lantern Check request and reported results to State/PM/DDTC. ¶C. TRAINING CONDUCTED DURING REPORTING PERIOD: (U) No training was conducted during the reporting period. III. UPCOMING TRAINING: ¶1. (U) A three-day Commodity Identification Training program, implemented by the Department of Energy, is being planned for February 2008 in Kaohsiung. ¶2. (SBU) A two-day Wassenaar Arrangement Update Meeting, lead by State/ISN/CATR, is notionally scheduled for the first week of March ¶2008. ¶3. (U) Preparatory meetings for Internal Control Program and Denied Persons Screening Tool software development are being planned for the end of March to April time frame. IV. UPCOMING MEETINGS ¶1. (SBU) On January, the Advisor will speak at the monthly meeting of Keelung Harbor Police on EXBS programs. Approximately 60 police personnel are expected to attend. ¶2. (SBU) On January 31, the EXBS Advisor will attend the Taiwan-Japan Industry Outreach Seminar. ¶V. RED FLAG ISSUES: None. POC for this report is Mi-Yong Kim, EXBS Advisor. Telephone +886 2 2162 2347. YOUNG