ADDITIONAL INFORMATION FOR TAIWAN ON JOHANN

S E C R E T STATE 088167 SIPDIS E.O. 12958: DECL: 08/15/2033 TAGS: PARM MTCRE PREL TW IR SUBJECT: ADDITIONAL INFORMATION FOR TAIWAN ON JOHANN MAIR'S EFFORTS TO SUPPLY MACHINE TOOLS TO IRAN (S) REF: A. STATE 053081 ¶B. AIT TAIPEI 00854 Classified By: ISN/MTR DIRECTOR PAM DURHAM FOR REASONS 1.4 (B), (C),AND (D). ¶1. This is an action request. AIT Taipei, please see paragraph 5. ¶2. (S) Background: In May 2008, the U.S. alerted Taiwan authorities that an individual named Johann Mair was attempting to sell Taiwan-origin, computer numerically controlled (CNC) vertical machining centers to the Iranian company Tehran Ekram Engineering Company (Ref A). Among the machines being offered by Johann Mair to Iran was a model QV209 3-axis vertical machining center potentially controlled by the Nuclear Suppliers Group (NSG) and produced by the Taiwan firm Pinnacle Machine Tools. To facilitate this sale, we understood Johann Mair, through his affiliates Fuyu Pacific Machinery Ltd. of China and Turret Industrial Company of Taiwan, would likely attempt to evade Taiwan's export control restrictions on machine tool transfers to Iran. Taiwan authorities responded in June 2008 that their export control agency would begin subjecting Pinnacle Machine Tools and Turret Industrial Company to regular inspections and require licenses for exports by these firms to Tehran Ekram Engineering Company or Fuyu Pacific Machinery (Ref B). ¶3. (S) We now would like to provide Taiwan with information indicating that in June and July 2008, Johann Mair, acting as a representative of the Malaysian company VMC Machinery, had been making arrangements to ship four machining centers produced by Pinnacle Machine Tools to Tehran Ekram Engineering Company. To facilitate this transfer and avoid Taiwan's export control restrictions, Mair amended the letter of credit and certificate of origin for this transaction to falsely claim these machines were manufactured in China rather than Taiwan. In these falsified documents, Mair also revised paperwork to list himself as representing his Chinese company Fuyu Pacific Machinery, rather than VMC Machinery. In other recent transactions with Tehran Ekram Engineering Company, Mair has identified himself as the representative of both Turret Industrial Company and Hong Kong's Tat Fung Hong Company, and again intended to obscure the origin of machine tools to appear to have been produced in China and not in Taiwan. ¶4. (S) In light of Johann Mair's and Pinnacle Machine Tools' efforts to knowingly violate Taiwan's export control laws, we want to press Taiwan authorities to use this information to support their ongoing investigation of this case and take measures to shut down Johann Mair's operations in Taiwan, specifically the Turret Industrial Company. We also want to ask them to prevent further exports by Taiwan companies to China's Fuyu Pacific Machinery, Hong Kong's Tat Fung Hong Company, or Malaysia's VMC Machinery because any transfer to these companies is likely be diverted to Iran. Finally, we want to ask Taiwan for an update on the investigation into this case and for any information uncovered as a result of the increased scrutiny described in Ref B that was to be applied to Pinnacle Machine Tools and Turret Industrial Company. ¶5. (S) Action Request: Request AIT Taipei approach appropriate Taiwan authorities to deliver talking points/non-paper in paragraph 6 below and report response. Talking points also may be provided as a non-paper. ¶6. (S) Begin talking points/non-paper: (SECRET REL TAIWAN) -- You will recall that in May 2008, we provided you with information indicating that a Chinese company named Fuyu Pacific Machinery Ltd. had offered in March 2008 to provide a Taiwan-origin, computer numerically controlled (CNC) vertical machining center to the Iranian company Tehran Ekram Engineering Company. -- The machine being sought by Tehran Ekram Engineering Company was a model QV209 3-axis vertical machining center potentially controlled by the Nuclear Suppliers Group and produced by the Taiwan firm Pinnacle Machine Tools. -- The individual coordinating this purchase for Fuyu Pacific Machinery Ltd. was named Johann Mair, who is also affiliated with Taiwan's Turret Industrial Company. -- During our May 2008 discussion, we noted that Turret Industrial Company also may have offices in Malaysia and China and that it had been working to supply both model SV116 and QV209 vertical machining centers produced by Pinnacle Machine Tools to Tehran Ekram Engineering Company. -- We brought this information to your attention because we understood these business dealings between Tehran Ekram Engineering Company and these companies associated with Johann Mair to be a coordinated effort to circumvent export control restrictions on machine tool transfers to Iran. -- You responded in June 2008 that you would begin requiring licenses for exports by Pinnacle Machine Tools and Turret Industrial Company to Tehran Ekram Engineering Company or Fuyu Pacific Machinery and that you would conduct regular inspections of these Taiwan companies. -- We would appreciate hearing an update on the status of your investigation into this case and on any information you have learned as a result of the increased scrutiny you have applied to Pinnacle Machine Tools and Turret Industrial Company. -- We also would like to provide you additional details regarding Johann Mair,s ongoing efforts to supply Taiwan-origin machine tools to Iran. -- Specifically, we understand that in June and July 2008, Johann Mair continued to work to supply model SV116 and QV209 vertical machining centers to Tehran Ekram Engineering Company. -- Our information indicates that Johann Mair, acting as a representative of the Malaysian company VMC Machinery, had been making arrangements to ship four Pinnacle SV116 machines to Tehran Ekram Engineering Company in mid-July 2008. -- To facilitate this transfer -- and avoid Taiwan's export control restrictions on machine tool sales to Iran -- Mair amended the letter of credit and certificate of origin for this transaction to falsely claim these machines were manufactured in China rather than Taiwan. -- We understand that in these falsified documents, Mair also changed the paperwork to list himself as representing his Chinese company Fuyu Pacific Machinery, rather than VMC Machinery. -- During the same time frame, Mair continued his earlier attempts to procure a model QV209 CNC vertical machining center Tehran Ekram Engineering Company. -- For this transaction, we understand Mair identified himself as the representative of both Taiwan's Turret Industrial Company and Hong Kong's Tat Fung Hong Company, and again intended to obscure the origin of this machine so that it would appear to have been produced in China and not in Taiwan. -- In light of Johann Mair's and Pinnacle Machine Tools' efforts to knowingly violate Taiwan's export control laws, we request you use this information to support your ongoing investigation into this case and take measures to shut down Johann Mair's operations in Taiwan, specifically the Turret Industrial Company. -- We also ask that you work to prevent further exports by Taiwan companies to China's Fuyu Pacific Machinery, Hong Kong's Tat Fung Hong Company, or Malaysia's VMC Machinery since any transfer to these companies will likely be diverted to Iran. -- We look forward to continued cooperation on export control and nonproliferation issues and would appreciate hearing an update on the actions you have taken in this case at the earliest possible time. End talking points/non-paper ¶7. (U) Washington POC is ISN/MTR James Mayes (Phone: 202-647-3185). Please slug any reporting on this issue for ISN/MTR. ¶8. (U) A word version file of this document will be posted at www.state.sgov.gov/demarche. RICE