EXTRANCHECK: POST SHIPMENT VERIFICATION: DRAGON WELL

UNCLAS HONG KONG 000001

USDOC FOR 532/OEA/LHINES/ADYSON/TWILLIS/EHOLLAND
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR PATRICK SANTILLO
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS

SIPDIS

E.O. 12958: N/A
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: DRAGON WELL
TRANSPORTATION LTD.

REF: A) USDOC 06873 B) HK 00971 (2007)



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


2. As per reftel A request 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
a post shipment-verification (PSV) at Dragon Well Transportation
Ltd., Unit 2-3 G/F, Hope Sea Ind. Ctr., No. 22-24 Lam Hing Street,
Hong Kong (Dragon Well). The item in question is an encircled flux
measurement system exported to Dragon Well on or about July 23, 2008
and valued at USD 7411. On the applicable shippers export
declaration (SED),these items are classified under export control
classification number (ECCN) 3A001 and, if properly classified,
would be controlled for national security (NS) reasons. The
exporter was Luminentoic of Chatsworth, California.


3. According to the Hong Kong Companies Registry, Dragon Well was
registered in March 1998, and it has less than the Hong Kong
equivalent of USD 1 in paid-in capital. Its directors are listed as
Hai, Sheung Wing and Lo, Ha with Hong Kong identification numbers
K799619(5) and P073706(6) respectively. Ms. Lo, Ha is the director
of a related company, Tronic Technology Network (HK) Company Limited
as well as a range of other Hong Kong companies. Tronic was the
subject of a previous unfavorable pre-license check described in
reftel B.


4. Internet research reveals that Dragon Well is a subsidiary of
China Oriental Express (www.coe.com.hk). Ms. Lo, Ha (referenced
above) is a director in both Dragon Well and China Oriental. Dragon
Well and China Oriental Express are freight forwarders.


5. On December 3, 2008, ECO and Commercial Assistant Carrie Chan
visited Dragon Well at the address listed above and met with Tony
Choi of Dragon Well and Ms. Ida Ho of Source Photonics, the end user
of the item. Ms. Ho (who did not have a business card to share)
explained that Source Photonics is the company resulting from the
merger of Luminentoic (the exporter of record) and Fiberxon (the
end-user on some of the applicable documentation provided to ECO by
Ms. Ho and OEA). A review of the web site of Source Photonics
(www.sourcephotonics.com) confirms this information. Ms. Ho of
Source Photonics stated that the company produces communication
modules for optical receivers.


6. According to Mr. Choi, Dragon Well is a long-term logistics
provider to Fiberxon (now Source Photonics) and provides warehouse
and logistics services to the company's mainland based factory. Mr.
Choi further stated that the factory in Shenzhen completes all
customs and other formalities on the shipments. When asked, Mr.
Choi could give no clear answer on whether Dragon Well (or any other
party) applies for required Hong Kong licenses for import of
strategic items into Hong Kong and their subsequent reexport. ECO
assumes Dragon Well does not apply for required Hong Kong licenses
in this respect (and that it is unaware of any applicable U.S.
licensing requirements for items controlled by U.S. law for reexport
from Hong Kong).


7. ECO reviewed various shipment documentation provided by Mr. Choi
and Ms. Ho of Source Photonics and it appears in order showing
shipment to Source Photonics in Shenzhen.


8. Based on the information noted above, ECO believes that the
applicable items were, in fact, shipped to Source Photonics in
Shenzhen. ECO notes that Dragon Well appears to be unaware of Hong
Kong and U.S. export control rules. ECO requests that OEA confirm
the 3A001 classification of the applicable item 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. A
determination of the control status of the item will likely also
determine whether a violation of U.S. law occurred in respect of
this shipment.