EXTRANCHECK: POST SHIPMENT VERIFICATION: (FELTON SUCCESS

UNCLAS HONG KONG 002038 USDOC FOR 532/OEA/LHINES/MCANNER 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: (FELTON SUCCESS LIMITED) BKN GROUP REF: A) BIS e-mail request dated August 14, 2009 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 Felton Success Limited, Unit 6, 21/F, Enterprise Square Two, No. 3 Sheung Yuet Rd., Kowloon Bay, Kowloon, Hong Kong (Felton). The items in question for this PSV are 256 CPUs exported to Felton on or about October 31, 2007. According to the exporter, these items are classified under Export Control Classification Number (ECCN) 3A991, meaning that they are controlled for anti-terrorism reasons and would require a license to Iran. The exporter is MA Labs of San Jose California. ¶3. According to the Hong Kong Companies Registry, Felton has been in existence since August 2008. Its paid up share capital is the Hong Kong equivalent of USD 125,000. The Hong Kong Companies Registry lists BVI company, Rise Sonic Group Limited, as the sole shareholder and director. The registered address of Rise Sonic appears to be the address of a range of BVI companies. ¶4. According to the company's web site (www.Felton.com.hk),Felton is a trading company founded in 1993 that specializes in computer related component business and focused on CPU and memory distribution business. The company claims to be able to supply a wide range of products including those from AMD, Micron, Toshiba, IBM, Western Digital and Quantum. ¶5. It took some time to arrange a visit to Felton. Eventually, Nelson Chow, Account Manager, agreed to meet with the ECO to discuss the transaction in question. On September 4, 2009, ECO and Commercial Assistant Carrie Chan visited the company and met with Chow. He explained that Felton is a trading company specializing in various computer parts. He stated that the company has been in existence for 14 years (likely under a previous name since the current company appears only to have been registered in 2008) and has worldwide customers. When asked how Felton obtains its customers, Chow stated that they come from referrals and that the company has many long-standing customers. Chow stated that he knew nothing about the director of the company. He further stated that the company has Middle East based customers as well as customers in Iran. ¶6. As to the specific transaction in question, Mr. Chow stated that the customer was Sayed Mousavi Trading in Dubai. He claimed not to know about BKN Group (another company linked to this transaction). Mr. Chow stated several times that he believed that this customer was located in Dubai. When confronted with e-mail correspondence on which he had been copied showing that the customer was in Iran, Mr. Chow eventually conceded that the customer was located in Iran. Mr. Chow subsequently stated that Mr. Mousavi of Sayed Mousavi Trading had come to Felton headquarters and had done prior business with Felton. Mr. Chow claimed not to be able to find a copy of Mr. Mousavi's card. Mr. Chow further stated that for this particular order, Mr. Mousavi had appointed a courier to pick up the items. That courier, according to Mr. Chow, had picked up the items as well as all corresponding documentation of the order. As a result, Mr. Chow claimed that he had no documentation for this order. Mr. Chow stated that Mr. Mousavi is an infrequent customer (ECO doubts this assertion). In some cases, Felton purchases on behalf of Mousavi while in other instances, Mousavi purchases the items and uses Felton as a ship to address (as occurred in this instance). Despite repeated requests from ECO, Mr. Chow declined to provide any additional information about the company's dealings with Sayed Mousavi Trading and/or its affiliated companies. ¶7. On October 21, 2009, ECO returned again to Felton to meet with Mr. Chow. At this meeting, Mr. Chow stated that BHK Group and Sayed Mousavi Trading are all related although Mr. Chow stated that he did not know how they were related. Mr. Chow allowed ECO to look at Mr. Mousavi's business card (although he refused to provide a copy). Mr. Mahdi Mousavi is listed as a representative of Hitech Computer Peripherals, Block 16, No 12 Gilam Street with phone number 982188942760 and fax 889422483 and a contact e-mail of info@hitech-smc.com. Mr. Chow stated that Felton has a four to five year history with Sayed Mousavi Trading. Mr. Chow stated that Sayed Mousavi Trading never issues purchase orders but that orders are typically done by phone or e-mail with wire transfers for payment. Sayed Mousavi Trading uses APM as its freight forwarder in Hong Kong (this is likely APM Global Logistics (Hong Kong) Company Limited, 16/F, One Kowloon, 1 Wang Yuen Street, Hong Kong). ¶8. Mr. Chow denied that Sayed Mousavi Trading and/or Mr. Mousavi own Felton but he declined to provide ECO with the name of the director of Felton (although he stated that he was not of Middle Eastern origin). ¶9. ECO believes Felton to be a most unsuitable recipient of U.S. origin technology. Mr. Chow was both evasive and untruthful on a number of occasions. In ECO's opinion, Mr. Chow (and Felton more generally) is aware of restriction on trade with Iran even if Mr. Chow initially denied knowledge of any restrictions. ECO recommends a close review of all shipments to Felton (and its address) as well as a review of shipments to APM and its address.