MISSILE TECHNOLOGY CONTROL REGIME (MTCR):

S E C R E T STATE 101150 SIPDIS PARIS FOR POL: NOAH HARDIE BRASILIA FOR POL: JOHN ERATH E.O. 12958: DECL: 09/29/2034 TAGS: MTCRE ETTC KSCA MNUC PARM TSPA FR BR SUBJECT: MISSILE TECHNOLOGY CONTROL REGIME (MTCR): MARITIME SHIPPING TRENDS OF CONTROLLED MATERIALS 2008-2009 Classified By: ISN/MTR Director Pam Durham. Reasons: 1.4 (B),(D),(H). ¶1. (U) This is an action request. Please see paragraph 2. ¶2. (C) ACTION REQUEST: Department requests Embassy Paris provide the interagency cleared paper "Maritime Shipping Trends Of Controlled Materials 2008-2009" in paragraph 3 below to the French Missile Technology Control Regime (MTCR) Point of Contact (POC) for distribution to all Partners. Info addressees also may provide to host government officials as appropriate. In delivering paper, posts should indicate that the U.S. is sharing this paper as part of our preparation for the Information Exchange that will be held in conjunction with the MTCR Plenary in Rio, November 9-13, 2009. NOTE: Additional IE papers will be provided via septels. END NOTE. ¶3. BEGIN TEXT OF PAPER: (SECRET REL MTCR) Maritime Shipping Trends Of Controlled Materials 2008-2009 SUMMARY Over the past year, proliferators have continued to use the maritime transportation industry to move export-controlled components and non-controlled dual-use materials to their ballistic missile programs. Maritime shipping can represent a significant cost savings to shippers, especially in the transport of large or heavy materials. This savings can easily offset the negatives and vulnerabilities of maritime conveyance, which is slow and represents a loss of control over the shipment for an extended period of time, not to mention exposure to seizure by local authorities during transshipment or intermediate port calls, and potential damage due to weather or rough seas. Numerous proliferators exploit the flexibility, speed, and perceived anonymity of the intermodal, or containerized, shipping system. However, direct point-to-point shipments continue to fill a key niche in the delivery of sensitive goods. To enhance the security of their goods as they are transported, proliferators often resort to denial and deception methods to hide the true end-users or identity of cargoes. The primary method used is a false or misleading description of goods on key shipping documents such as bills of lading (BOLs),cargo manifests, and letters of credit. In addition, ships engaged in point-to-point shipments of proliferation concern have been known to change their operations in order to disguise not just the cargo, but the ship,s destination as well as the ship itself. INTERNATIONAL INTERMODAL SHIPPING The containerization of cargoes has been a growing trend in the shipping industry for decades. Under this method, cargoes are loaded into standardized metal shipping containers of twenty or forty feet in length. This standardization increases the speed at which cargoes may be loaded and unloaded in port. Additionally, the use of containers provides a greater degree of superficial anonymity to cargoes: to the on-the-scene observer in a port, a containerized shipment of electronics looks identical to a containerized shipment of scrap paper. This perceived anonymity, magnified by the sheer volume of containers, has been exploited by all kinds of nefarious actors, from narcotics smugglers to human traffickers to proliferators. Containerized shipping also offers the proliferator potential cost-effectiveness over point-to-point shipments. On the other hand, containerized shipping leaves a proliferation-related cargo vulnerable in many ways. The global intermodal shipping industry relies heavily on a hub- and-spoke system to move cargo from smaller ports using smaller feeder vessels to larger ports, where cargoes are consolidated onto larger ships. This system, which provides efficiencies and economies to the shipping industry itself, can sometimes result in a longer voyage than a direct point- to-point delivery would take. As a cargo awaits transshipment in a hub port, it presents opportunities for inspection or detention of suspect cargoes as allowed by national or international authorities. IRAN Iran continues to use its Islamic Republic of Iran Shipping Lines (IRISL) for the delivery of ballistic missile- related materials. Owned in part by the Iranian government, IRISL has long been Iran,s preferred maritime carrier for sensitive shipments. IRISL offers both containerized services, which provide convenience, speed, and cost benefits, as well as a fleet capable of point-to-point deliveries. As an Iranian-owned line, IRISL provides an additional layer of national control over shipments in transit. However, IRISL is not the only provider of shipping services to Iran. Approximately 25 lines offer 27 containerized liner services that call directly at Bandar Abbas, Iran,s primary commercial port. Iran has used foreign shipping lines, including those owned by MTCR Partner states, to deliver materials for its ballistic missile program. We believe that IRISL remains a preferred carrier for most sensitive shipments, but the use of third country carriers to deliver controlled items to Iran does occur. Iran prefers to use IRISL for point-to-point deliveries of missile-related breakbulk cargoes. However, post-sanctions measures taken by IRISL to use non-Iranian chartered vessels may indicate a new method to mask imports of proliferation- related items. This was demonstrated in early 2009 in the case of the M/V MONCHEGORSK, a Cypriot-flagged cargo ship carrying conventional military cargo from Iran to Syria in violation of United Nations Security Council Resolution (UNSCR) 1747. NORTH KOREA North Korea receives containerized shipments of missile- related materials and also probably uses the international containerized intermodal transportation system for the export and delivery of dual-use missile-related components to its customers. As practically no international shipping lines call in North Korean ports, these cargoes must be transshipped, most likely through ports in northern China. North Korea maintains its own fleet of cargo ships, which are capable of running regional feeder services to conduct final delivery of goods to North Korea. This fleet is also capable of conducting point-to-point deliveries of ballistic missile- related materials to North Korean customers in the Middle East, as well as to North Korea itself. SYRIA Without a substantial shipping fleet of its own, Syria largely relies on the intermodal shipping system for deliveries of MTCR-controlled and uncontrolled materials for its missile program. Lattakia is Syria,s primary commercial port, and receives the majority of its containerized cargoes, both for import and export. Since few lines call directly in Syrian ports, most of these shipments must be transshipped in the Mediterranean to a feeder vessel before final delivery. The most frequently used ports for transshipment of commercial cargoes to Syria are Limassol, Cyprus; Damietta, Egypt; and Marsaxlokk, Malta. Proliferation-related cargoes using the intermodal system probably transit these ports along with the flow of commercial cargoes. DECEPTION TECHNIQUES Moving goods through the international intermodal system exposes them to potential scrutiny. Numerous parties, from customs officers to port officials to bankers, review the paperwork associated with exporting, paying for, loading, transshipping, and delivering cargoes. As a result, proliferators using the intermodal shipping system frequently employ deceptive practices to evade detection. In addition to using false end-users and listing front companies as recipients, shippers of proliferation-related cargoes also frequently alter the description of the cargo in order to disguise the controlled nature of the goods. This practice is not unusual in the shipping industry, where unscrupulous customers will often falsify the contents of the containers on the bill of lading and the shipping documentation, usually in order to evade tariffs, but also to disguise illicit goods. Other practices common in the shipping industry, such as generalized cargo descriptions, also may obscure the nature of the items actually being shipped. A five-axis CNC machine, for example, might be described as merely "machinery" on the bill of lading and the ship,s cargo manifest. These methods have been steadily embraced by proliferators, and the use of this practice remained constant in the 2008 to 2009 period. Additionally, it remains acceptable in many regions to describe cargoes merely as "freight of all kinds" or "general cargo." Other shipping documents may also be vulnerable to deception efforts. For example, bills of lading may use incorrect ship names or have duplicates issued so as to avoid detection when reviewed by the bank. IRISL, for example, has changed the names of many of its cargo ships in a probable attempt to avoid association with the sanctioned entity "IRISL." Observed deception techniques in a point-to-point shipment involve not only false declarations on shipping paperwork, but also changes in the way ships carrying these cargoes are operated. In the industry, it is not unusual for a breakbulk ship to change its declared destination mid- voyage for a commercial reason. When a ship disguises a sensitive voyage to deliver proliferation-related materials, it can deliberately lie about its destination and next port of call to port authorities, and still fit within the norms of the industry. Ships attempting to avoid detection may also turn off standard navigation and safety equipment, such as the Automated Identification Systems (AIS). AIS is an automated anti-collision broadcast system similar to an airplane transponder. The use of AIS is mandated on ships over 300 gross tons engaged in international trade. Turning off this system is counter to the requirements of the United Nations Convention on the Safety of Life At Sea Convention (SOLAS), and outside of the typical norms of the shipping industry. While SOLAS does allow for ship masters to turn off their AIS systems in the event the master feels that emitting a signal would expose the ship to potential safety threats, turning off the system outside of the most pirate-infested areas of the world,s shipping lanes is not typical practice. These changes in operations are rarely seen in the shipment of goods via container services. The containerized sector of the shipping industry relies heavily on published schedules and rigidly timed port rotations. If a ship on a container service were to deviate from its declared or scheduled port, this would be considered highly unusual by industry standards. Additionally, the shipping line would incur significant expenses by diverting or changing its port calls at the last minute, as its customers would likely seek compensation for any delays in the delivery of their cargoes. In any case, container ships can carry hundreds or even thousands of containers onboard. Because of the volume of containers on a ship, the master and crew are rarely aware of the presence of proliferation-relevant materials on their ships - especially if the goods are falsely described on the BOL and manifest. CONCLUSION Maritime transportation remains a key method of moving controlled and non-controlled materials for proliferant missile programs. Programs of concern continue to rely heavily on the international intermodal system. Since the intermodal system can involve many nations - through the involvement of ships under differing national flags or ownerships as well as transshipment ports - use of this system can create opportunities for MTCR countries to act against the proliferation of ballistic missile-related materials. We urge Partner countries to exercise vigilance against the exploitation of their ports, flags, and ships for the use of shipment of proliferation-related items. END TEXT OF PAPER. ¶4. (U) Please slug any reporting on this or other MTCR issues for ISN/MTR. A word version of this document will be posted at www.state.sgov.gov/demarche. CLINTON