1. (U) This is an action request.



2. (S) Action Request: The United States will announce in the
Federal Register on Wednesday, October 22 the imposition of
sanctions under the Iran, North Korea, and Syria
Nonproliferation Act (INKSNA). Thirteen entities in eight
countries will be included. One South Korean entity, Yolin
Technology, Inc., will be among those sanctioned. Post is
requested to pre-notify the ROKG in advance of the
publication of the sanction against Yolin. We want to
provide advance notice to the Korean Government of this
decision, note that this determination will be published in
the Federal Register, and make clear that the sanctions apply
only to Yolin Tech, not the Korean government. Please draw
from the talking points in paragraph 5. Talking points also
may be provided as a non-paper.



3. (S) Background for Post Only: In December 2005, the ROK
company Yolin Tech attempted to provide potassium bifluoride
to Iran; however, the shipment was stopped while en route in
Singapore. The interdicted potassium bifluoride was
reportedly returned to the ROK where it was to have been sold
on the domestic market. According to subsequent information,
Yolin Tech was able to complete the shipment to Iran in May
2006, by falsifying export documents and disguising the
chemicals as "wood preservatives." The May 2006 transfer and
resulting ROK enforcement actions have been reported in the
ROK press. According to ROK press reports, an unauthorized
export of potassium bifluoride in the ROK is subject of up to
five years of jail time or a fine of three times the price of
the goods. While Yolin Tech was reportedly warned and
watchlisted as a result of the December 2005 export attempt,
it avoided legal charges at the time because the export had
not been completed. Press reports indicate that ROK
authorities took the director of the ROK company into custody
on October 11 for the May shipment. Bilateral discussions
with the ROKG confirmed these reports. The Director of Yolin
Tech, which was found to be a one-man front company, was
arrested, prosecuted, and sentenced to eight months
imprisonment, two years probation, and 80 hours of community
service for document falsification. Potassium bifluoride is
controlled by the Australia Group due to its potential use as
a precursor for sarin gas. It also has nuclear-related uses
in uranium conversion and uranium hexafluoride production.
Consequently, and in support of ROKG enforcement activity,
the USG has determined that the transfer warrants the
imposition of measures pursuant to Section 3 of the Iran,
North Korea, and Syria Nonproliferation Act.



4. (S) General Background: The Iran, North Korea, and Syria
Nonproliferation Act (INKSNA) requires periodic reports to
Congress identifying foreign entities with respect to whom
there is credible information indicating that they have
transferred to or acquired from Iran, North Korea or Syria
goods, services, or technology on multilateral control lists
(Australia Group, Chemical Weapons Convention, Missile
Technology Control Regime, Nuclear Suppliers Group, and the
Wassenaar Arrangement) or certain other items with the
potential to make a material contribution to WMD development
or missile programs. End Background.



5. (S//REL KOREA) Suggested Talking Points:

-- We wish to inform you that the U.S. has made a
determination to impose sanctions against a ROK entity for
the transfer of sensitive items to Iran.

-- The United States has determined that there is credible
information indicating that Yolin Technology, Inc.
transferred to countries covered under the Act items on a
multilateral control list, or other items that have the
potential to contribute materially to WMD development or
missile programs.

-- We have previously raised our concerns about this entity
with the ROKG, are aware of the ROKG,s enforcement activity
against this company, and have made the determination to
impose sanctions in support of Korean enforcement activity.

-- These measures apply only to this entity, not to Korea or
Korean authorities; we will make that clear in any public
treatment of this issue.

-- The Iran, North Korea, and Syria Nonproliferation Act
(INKSNA) is one such law. This law requires periodic reports
to Congress identifying foreign entities with respect to whom
there is credible information indicating that they have
transferred to or acquired from Iran, North Korea or Syria
goods, services, or technology on multilateral control lists
(Australia Group, Chemical Weapons Convention, Missile
Technology Control Regime, Nuclear Suppliers Group, and the
Wassenaar Arrangement) or certain other items with the
potential to make a material contribution to WMD development
or missile programs.

-- Accordingly, pursuant to the provisions of the Act,
the following measures are imposed on this entity, and its
successors, subunits, and subsidiaries:

a. No department or agency of the United States Government
may procure, or enter into any contract for the procurement
of any goods, technology, or services from them;

b. No department or agency of the United States Government
may provide any assistance to them, and they shall not be
eligible to participate in any assistance program of the
United States Government;

c. No United States Government sales to them of any item on
the United States Munitions List are permitted, and all sales
to them of any defense articles, defense services, or design
and construction services under the Arms Export Control Act
are terminated; and

d. No new individual licenses shall be granted for the
transfer to them of items, the export of which is controlled
under the Export Administration Act of 1979
or the Export Administration Regulations, and existing
such licenses are suspended.

-- These measures will take effect shortly and will remain in
place for two years.

-- This determination will be published soon in the Federal
Register of the United States.

-- This case is a further indication of the serious ongoing
problem of the exploitation by proliferators of export
control mechanisms. We continue to value our strong and
close nonproliferation cooperation.

End suggested talking points



6. (U) Please slug any reporting on this issue for ISN/MTR
and EAP/K. A response is requested as soon as possible.
Department point of contact is Stephen Tomchik, VCI/FO,
202-647-1192 (tomchiksj@state.sgov.gov).
RICE


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End Cable Text