FOLLOWING UP WITH TAIWAN ON TRANS MERITS (S)

S E C R E T STATE 082164



SIPDIS



E.O. 12958: DECL: 07/30/2033

TAGS: PARM, MTCRE, PREL, TW, KN

SUBJECT: FOLLOWING UP WITH TAIWAN ON TRANS MERITS (S)



REF: A. 99 STATE 190761

B. 99 STATE 235564

C. 03 STATE 68826

D. 06 STATE 204021

E. 07 AIT TAIPEI 17

F. 07 AIT TAIPEI 72

G. AIT TAIPEI 86



Classified By: ISN/MTR DIRECTOR PAM DURHAM, REASON 1.4 (C).



1. This is an action request. AIT Taipei, please see

paragraph 4.



2. (S) Background: On several occasions since 1999, we

have discussed with Taiwan representatives the

proliferation-related activities of the Taiwan-based

firm Trans Merits (Refs). This firm has engaged in

numerous transactions with North Korea's primary

weapons trading firm, the Korea Mining Development

Trading Company (KOMID),as well as other DPRK entities

of proliferation concern. In December 2006, we advised

Taiwan that Trans Merits had shipped a cargo of

precision lathes and accessories to the Rangoon, Burma

office of KOMID (Ref D). In January 2007, Taipei

informed us that its Bureau of Foreign Trade had begun

an investigation into Trans Merits (Ref E),and in

January 2008, a Taiwan newspaper reported that the

Ministry of Justice Investigation Bureau (MJIB) was

investigating Trans Merits and its head, Tsai Hsien-



Tai, for the export to North Korea and China of

instruments and machinery that could be used in a

nuclear weapons program (Ref G). We are particularly

concerned with any potential interactions with North

Korea's nuclear program, given North Korea's probable

assistance to Syria with the covert construction of a

nuclear reactor. According to the article, Tsai is now

restricted from leaving Taiwan.



3. (S) Despite Taiwan's investigation, we have

information indicating that Trans Merits' trading

activities with KOMID are continuing. We are also

concerned that although a travel restriction is

supposed to be in force against Tsai, he has apparently

been able to leave Taiwan and visit Hong Kong, where in

early June we understand he was coordinating a shipment

of metals to North Korea. We want to raise these

issues with Taiwan representatives and to clarify the

details related to Taiwan's investigation and the legal

status of Tsai and Trans Merits, including information

related to the reported travel ban. We also want to

advise Taiwan that the activities of Tsai and Trans

Merits could potentially result in the imposition of

economic sanctions pursuant to U.S. law.



4. (S) Action Request: Request AIT Taipei approach

appropriate authorities to deliver talking points in

paragraph 5 below and report response. Talking

points also may be provided as a non-paper.



5. (S) Begin talking points/non-paper:



(SECRET REL TAIWAN)



-- In the spirit of our export control and

nonproliferation cooperation, we would like to discuss

with you a matter of serious proliferation concern.



-- On several occasions since 1999, we have discussed

with you the proliferation-related activities of the

Taiwan-based firm Trans Merits.



-- Specifically, in 1999, we shared information

indicating that members of the North Korean weapons

trading firm, Changgwang Sinyong (also known as the

Korea Mining Development Trading Company (KOMID)),had

visited Taiwan to find suppliers of machine tools for

the DPRK missile program. At the time, we informed you

that Trans Merits was involved in this activity.



-- The deal for machine tools that Changgwang Sinyong

negotiated with Trans Merits was later turned over to

the North Korean firm Tosong Technology Trading

Corporation.



-- Both KOMID and Tosong are entities of proliferation

concern.



-- On June 29, 2005 President Bush issued Executive

Order 13382 and designated KOMID as a proliferator of

weapons of mass destruction or their means of delivery

whose property and interests in property in the United

States are blocked. At the same time, the Department

of Treasury identified Changgwang Sinyong Corporation

as an alias of KOMID.



-- On October 21, 2005 the U.S. Government also

designated Tosong Technology Trading Corporation and

Hesong Trading Corporation pursuant to E.O. 13382.



-- Additionally, from at least 2003, Trans Merits may

have assisted North Korea in acquiring aluminum ingots,

hydraulic presses, gauges, sensors, and pressure

transmitters. Many of these commodities have dual-use

applications and could possibly be linked to the North

Korean nuclear program.



--The Japanese press also reported in early July 2008

that vacuum pumps originally exported to Trans Merits

in July 2003 were subsequently found by the

International Atomic Energy Agency in 2007 at North

Korea's Yongbyon nuclear facility.



-- Furthermore, around February 2006, KOMID sought from

Trans Merits a variety of machine tools, drill presses

and heavy equipment.



-- In November 2006, we requested that Taipei ensure

that KOMID and its subsidiaries are not engaged in arms

trade with businesses in Taiwan, consistent with the

requirements of UN Security Council Resolution 1718.



-- In December 2006, we advised you that Trans Merits

had shipped a cargo of precision lathes and related

accessories to the Rangoon, Burma office of KOMID, and

expressed our concerns about the close business

relationship between Trans Merits and North Korean

entities of concern. As you know, KOMID is North

Korea's primary marketer of military equipment.



-- We are also concerned that the goods Trans Merits

supplies to KOMID's Burma office could be transshipped

to North Korea.



-- In January 2007, you informed us that as of December

2006, Taiwan's Bureau of Foreign Trade had begun an

investigation into Trans Merits.



-- Since that time, despite efforts by Taiwan

authorities to investigate Trans Merits business

activities, Trans Merits has continued a business

relationship with KOMID.



-- For example, in mid-May 2007, Trans Merits was

considering the transfer of parts for a thread rolling

machine with KOMID representatives in Burma.



-- In October 2007, Trans Merits provided KOMID with

details on a computer numerically controlled flame

cutting machine.



-- In January 2008, press reporting (from Taiwan's

United Daily News) indicated that the Ministry of

Justice Investigation Bureau (MJIB) was investigating

Trans Merits and an affiliate for the unauthorized

export to North Korea and China of precision

instruments and machinery that could be used to

manufacture nuclear weapons.



-- The article indicated that Tsai and a colleague

submitted false shipping documents to the Taiwan

Customs Bureau, and used the false documents to ship

controlled machine tools to a third country for final

destination to a company with military ties in North

Korea.



-- The press article also stated that the MJIB

conducted a search of Trans Merits and the residence of

Trans Merits representative Tsai Hsien-Tai.



-- We understand that Tsai and other executives were

questioned and released after posting bail, and that

Tsai was restricted from leaving Taiwan.



-- However, we also understand that in early June 2008,

Tsai was in Hong Kong coordinating to ship various

metals to North Korea via China.



-- In light of our concerns about Tsai and his apparent

ongoing dealings with KOMID, we would be very

interested in learning any details you can provide

related to Taiwan's investigation of Trans Merits, or

to any subsequent prosecution that might take place.



--In addition, we are particularly interested in any

information regarding past and current dealings by Tsai

and Trans Merits with North Korea's nuclear program.

North Korea's probable assistance to Syria on the

covert construction of a nuclear reactor highlights the

need to enhance vigilance over any relationships that

North Korea's nuclear program might have with

businesses in Taiwan and elsewhere.



-- We would also like to inquire as to the legal status

of Tsai and Trans Merits, and would be particularly

interested to learn the details of the reported travel

ban on Tsai given his apparent ability to leave Taiwan.



-- We are following this case with great interest due

to Trans Merits' history of procurement activity on

behalf of KOMID and other North Korean entities of

concern. Such activity could potentially result in

economic sanctions pursuant to U.S. law.



-- We look forward to future cooperation on export

control and nonproliferation issues and to learning of

the results of your investigation into this activity at

the earliest possible time.



End talking points/non-paper



6. (U) Please contact ISN/MTR's John Paul Herrmann

with any questions or follow-up issues related to this

case (202-647-1430 - herrmannjp@state.sgov.gov) and

slug any reporting on this issue for ISN/MTR.



7. (U) A word version file of this document will be

posted at www.state.sgov.gov/demarche.

RICE