EXTRANCHECK: POST SHIPMENT WING FAT TRADING CO/SHENZHEN

UNCLAS HONG KONG 001070

SIPDIS

C O R R E C T E D COPY SIGNATURE

USDOC FOR 532/OEA/LHINES/ADYSON
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS

E.O. 12958: N/A
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT WING FAT TRADING CO/SHENZHEN
XINYUE CORP

REF: A) USDOC 03522 B) USDOC 03524 C) USDOC 03613

1.Unauthorized disclosure of the information provided below is
prohibited by Section 12C of the Export Administration Act.


2. As per reftels A to C requests 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) conducted
three post shipment-verifications (PSVs) at Shenzhen Xinyue Corp.
(two checks),Rm 2302, 23/F, Pitt St, Hip Kwan Commercial Bldg 38,
Hong Kong (Xinyue) and Wing Fat Trading Co. (same address) (one
check) (Wing Fat). The items in question are three shipments of
semiconductors. Two shipments of EAR99 semiconductors were shipped
to Xinyue on June 19, 2007 and November 1, 2007. Items classified
as EAR99 can generally be exported/reexported to all destinations,
end-users/uses worldwide except to certain heavily restricted
destinations and certain proliferation related or other restricted
end-users/uses. The third shipment to Wing Fat was exported on
August 14, 2007. The semiconductors in this shipment were
classified by the exporter under export control classification
number (ECCN) 3A001a.2.c. This ECCN is controlled for national
security (NS) reasons and most likely requires a license for export
to mainland China but does not require a license if shipped to Hong
Kong. The exporter for all three shipments was Rochester
Electronics of Newburyport, Massachusetts.


3. According to the Hong Kong Inland Revenue Department Business
Registration Office, Win Fat Trading Co. has been in existence since

1998. It is a sole proprietorship (and is therefore not registered
in the Hong Kong Companies Registry). The owner is listed as Mr.
Khoo, Cheng Yan with Hong Kong identification number D1667409. The
company has no apparent web presence. Xinyue does not appear to be
registered as a corporate entity or sole proprietorship in Hong
Kong. It likewise does not appear to have a web presence.


4. On June 2, 2008, ECO, accompanied by Commercial Assistant,
Carrie Chan visited the two companies at the Pitt Street address
referenced above and met with Mr. Lu Yan of Xinyue and Mr. Khoo
Cheng Yan, Managing Director of Wing Fat Trading Co. Mr. Lu Yan
stated that he had forgotten his business cards and so was unable to
share one with the ECO. The meeting was held in a small, one room
office containing a desk, a small couch and various boxes apparently
containing shipments received by Wing Fat (one from Lattice
Semiconductor). Multiple additional boxes were delivered during the
meeting.


5. According to Mr. Khoo Cheng Yan, Wing Fat acts as the receiving
agent for Xinyue. In particular, when Wing Fat receives shipments,
Mr. Khoo Cheng Yan either ships the items to Xinyue customers in
Hong Kong or the customers collect the items from his office.
According to Mr. Khoo Cheng Yan, no purchase orders or other
transactional details are conducted from the offices of Wing Fat.
Mr. Khoo Cheng Yan stated that the two companies are not related and
that Xinyue has merely hired Wing Fat to act as its agent.


6. According to Mr. Lu Yan, Xinyue generates all purchase orders
from its office in Shenzhen (there are additional Xinyue employees
at its offices in Shenzhen). Xinyue issues purchase orders to
companies, including U.S. suppliers, and arranges for the items to
be shipped to the Hong Kong address of Wing Fat. Mr. Lu Yan stated
that he knows that some of his customers resell the items to other
countries but he stated that he does not know what countries those
might be. He stated that his business is focused on electronics
components for the communications industry.


7. As to the shipments in question, Mr. Lu Yan stated that all were
destined to the same customer, an electronics store in Shenzhen. He
provided documentation on the shipment (by FedEx) to Wing Fat
confirming receipt by Wing Fat as well as an Invoice from Wing Fat
Trading Co. dated August 21, 2007 listing a buyer address (but no
company name). This is the transaction referenced in reftel A. Mr.
Lu Yan stated orally that the customer is an electronics store with
the name Shenzhen Duo Hue Dian Ze. Subsequent research indicated
that the address on that invoice corresponds to a company called
Shenzhen Shi Xin Er Ye Ltd. (this is a transliteration of
information at web site www.hqew.com/homepage/ sply). The web
information on this company includes Mr. Lu Yan as the contact
person and a contact number for the company that corresponds to the
Shenzhen Xinyue phone number in purchase order documentation
provided by OEA. The web site of this company states that the
company specializes in the military industry and aerospace
electronics.


8. Mr. Lu Yan stated that delivery was confirmed by the initials of
the person picking up the shipment at the bottom of the invoice (a
USD 17,000 transaction). By subsequent phone call, ECO attempted to
obtain the underlying purchase order for these transactions but has
not yet had any success (ECO will inform OEA if such purchase orders

are received although ECO is doubtful they will ever be received).
ECO asked whether Xinyue or Wing Fat had generated this order. Mr.
Lu Yan stated that it had been generated by Xinyue. When confronted
with a purchase order from Wing Fat (provided to ECO by OEA),Mr. Lu
Yan amended his answer somewhat by stating that he had generated the
order out of Shenzhen using Wing Fat's name. Mr. Khoo Cheng Yan did
not seem surprised or perturbed by the use of Wing Fat's name in
this way. When ECO asked who had filled in the Rochester
Electronics End User Statement listing Qiu Qing Yuan (another
transliteration of Khoo Cheng Yan) as signatory (though the name was
typed and not signed on the form),Mr. Koo stated that he had
passed the statement to th customer who had filled it in. Neither
Mr. KhooCheng Yan nor Mr. Lu Yan could (would) state who the real
end-user was in this circumstance. The sated end-user was
Sinlecory Electronics Engineerng Co., Ltd. of Hong Kong. That
company has no eb presence and is not listed in the Hong Kong
Copanies Registry.


9. As to the first shipment t Xinyue (exported on June 19, 2007
and noted in eftel B),Mr. Lu Yan stated that neither he nor Mr
Khoo Cheng Yan were able to provideshipping documentation
confirming receipt of the items. However, they provided an invoice
listing the buyer's address (described above). That invoice
included the items exported by Rochester and referenced in the
documentation provided by OEA. In this case, Xinyue issued the
purchase order and apparently Mr. Lu Yan prepared the end-user
statement for Rochester Electronics. When questioned, however, Mr.
Lu Yan stated that while he filled in the form, the customer filled
in the names and other details of the end-users and he merely
attached to the statement for Rochester. He stated that he knew
little about the customers listed, although he believes some may be
involved in communications.


10. As to the later shipment from Rochester to Xinyue (shipped on
November 1, 2007 and referenced in reftel C),Wing Fat/Xinyue were
unable to provide any documentation relating to this shipment. Mr.
Lu Yan stated that in this circumstance, the End Use Statement
provided to Rochester Electronics had purportedly been signed by the
end user (Xian Yong Da Co.). In particular, Xinyue's customer had
arranged for the signature of the document by the purported end
user.


11. Mr. Lu Yin stated that he worked with one usual contact at
Rochester (listed on documentation as Jennifer) in ordering the
items and that Rochester was unaware of the final destination
(mainland China) of the items.


12. ECO provided information concerning BIS reexport controls to
the representatives of Xinyue and Wing Fat. Mr. Lu Yan asked what
products were restricted to mainland China. ECO noted that further
information could be found on the BIS web site but that certain
electronic components require a license to mainland China
(particularly radiation hardened devices and those rated for
operation at a wide range of temperatures). Mr. Lu Yan stated that
he seldom dealt in those types of items. He further stated that he
tries to avoid trading in items that require export licenses. When
asked whether he was aware that Hong Kong places similar licensing
requirements on shipments of certain electronic components, Mr. Lu
Yan repeated that he tries to avoid transactions involving items
requiring a license.


13. Both Wing Fat and Xinyue are entirely unsuitable recipients of
U.S. origin technology. ECO did not find the answers of Mr. Lu Yan
and Mr. Khoo Cheng Yan to be credible. In fact, ECO strongly
suspects that Mr. Lu Yan uses the Wing Fat corporate information
when ordering items that may require a license for export to
mainland China and where a license is not required for shipment to
Hong Kong. ECO recommends a thorough review of all shipments to
Wing Fat, Xinyue and their respective addresses. ECO also recommends
that BIS reach out to Rochester to determine what information it had
on hand when it shipped the items. Further, ECO requests that OEA
confirm the 3A001 classification of the Wing Fat shipment so that
ECO may reach out to Hong Kong TID concerning a potential violation
of Hong Kong's export control rules in connection with this
shipment. Finally, ECO recommends that these two companies be added
to the BIS Unverified List. CUNNINGHAM