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IdentifierCreatedClassificationOrigin
10HONGKONG190 2010-02-01 10:18:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Hong Kong
Cable title:  

BLUE LANTERN LEVEL 3: POST-LICENSE/PRE-SHIPMENT

Tags:   ETTC KOMC HK 
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VZCZCXYZ0004
PP RUEHWEB

DE RUEHHK #0190/01 0321018
ZNR UUUUU ZZH
P 011018Z FEB 10
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 9525
INFO RHMFIUU/HQ BICE INTEL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUETIAA/DIRNSA FT GEORGE G MEADE MD
RHMCSUU/FBI WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUCPDOC/USDOC WASHDC
					  UNCLAS HONG KONG 000190 

SENSITIVE
SIPDIS

DEPT FOR PM/DTCC - BLUE LANTERN COORDINATOR

E.O. 12958: N/A
TAGS: ETTC KOMC HK
SUBJECT: BLUE LANTERN LEVEL 3: POST-LICENSE/PRE-SHIPMENT
END-USE CHECK ON LICENSE 050207857

REF: SECSTATE 1592



1. (SBU) Per reftel request, Post conducted
post-license/pre-shipment check on license 050207857 for the
export of grenade and grenade launchers to Hong Kong. After
meeting with the parties to this license (Props Co. Ltd. and
Hong Kong Special Administrative Region Immigration
Department), Post's Blue Lantern Coordinator (BLC) and
Economic Officer established the bona fides of this
transaction and assessed the Hong Kong Immigration Department
as a reliable recipient of reftel items.

Props Co. Ltd.


--------------------------





2. (SBU) On January 20, BLC and EconOff visited Props Co.
Ltd. (Props) and met with its Managing Director, Eddie Ho
Ying-Hang. Established in 1987, Ho's current principals are
Mr. Ho, Ho's spouse (Agnes Seto Yiu Nin; Canadian), and Ho's
mother (Tam Suk Chun; Australian). Props currently has six
employees.



3. (SBU) Props serves three types of clients: (1) the movie
filming industry in Southeast Asia; (2) Hong Kong Government
(HKG) security and law enforcement agencies (disciplined
services); (3) and civilian sport shooters in Hong Kong.

- i. Props provides a wide selection of special-effect
(deactivated) firearms, secure weapons storage, movie props,
as well as "on-the-set" professional weapons handling skills
training to the movie filming industry.

- ii. Props advises, assists in drafting documentation, and
procures weapons and ammunition on behalf of HKG's
disciplined services, including the Hong Kong Police Force
(HKPF), the Correctional Services Department (CSD), Hong Kong
Customs and Excise Department (HKCED), and the Hong Kong
Immigration Department (ID).

- iii. Props also provides secure weapons storage to
HKG-licensed civilian sport shooters. Hong Kong's strict
legislation on weapons and ammunition bans all non-HKG law
enforcement personnel from storing weapons and/or ammunition
anywhere other than at HKPF-authorized venues such as Props.



4. (SBU) Props' sales of U.S.-origin defense articles depend
on the operational equipment needs of Hong Kong's disciplined
services and are prompted by government tenders. Average
annual sales range from US$1-1.5 million. Past products for
the HKG have included Smith and Wesson pistols, carbines, and
ammunition. Ho said Props had never sold U.S.-origin defense
articles to customers outside of Hong Kong. However, Ho
disclosed Props had sold non-U.S. law enforcement equipment
to the Macau SAR Government. Ho demonstrated to us his
knowledge of regulations governing the sale of U.S.-origin
defense articles to nearby jurisdictions, including mainland
China and Macau. For example, when Macau law enforcement
officials approached him for the procurement of firearms, he
supplied them with articles from Brazil which were not
subject to U.S. export rules, he said.



5. (SBU) Props is a procurement "middle-man" in reftel
transaction. The U.S. exporter will ship the items directly
to the end-user, the Hong Kong Immigration Department (ID).
Props will not take physical possession of the items,
although it will arrange transportation within Hong Kong.
Props will receive a commission from the manufacturer, Ho
said. He provided copies of: the End-User Certificate from
the Immigration Department; the DSP-83 Non-transfer and Use
Certificate; the Purchase Order from the ID; and the
HKG-issued Import Certificate.



6. (SBU) Props maintains a very low profile, operating out of
the basement of the business center where it has its office.
Its facilities appear very secure. CCTV cameras cover the
office's entrance, lobby area, and interior. Personnel
maintain controlled access at the front, lobby, and interior
doors. The office houses a safe for explosives and
ammunition as well as a larger two-section vault for weapons
storage. The outer vault section has a combination-locked
heavy-duty door. Props stores decommissioned weapons for
movies within this first section of the vault. Inside, a
second combination-locked door secures the live-weapons

storage section of the vault. Ho said the HKPF and HKCED
conducted monthly site inspections of his premises.
Furthermore, the Police's Forensics Firearms Examination
Bureau inspected each decommissioned weapon every three years
to ensure the weapons remained inactive and mechanically safe.



7. (SBU) Ho showed familiarity with the regulations governing
the import of U.S.-origin defense articles, including
restrictions on unauthorized re-transfer or re-export. Ho
was less familiar, however, with the regulations governing
brokers and the requirement for brokers to register with the
U.S. Department of State (i.e., he was uncertain if he was
considered a broker and unaware of the procedures for
registering). BLC provided Ho with contact information for
the Department's Directorate of Defense Trate Controls (DDTC)
Response Team and encouraged him to seek clarification on the
matter.

Hong Kong SAR Immigration Department (ID)


--------------------------





8. (SBU) On January 26, Post's BLC and EconOff met with Ms.
Yu Mei-kow, Chief Immigration Officer for Service Support,
and Mr. Yuen Wai-leuk, Assistant Quartermaster and Senior
Immigration Officer for Service Support, at the Hong Kong
Immigration Tower. Ms. Yu confirmed that the ID had ordered
the defense articles listed on the license. Ms. Yu and Mr.
Yuen also provided copies of the transaction's purchase order
and the DSP-83.



9. (SBU) Ms. Yu verified the exact types and quantities of
defense articles ordered based on the ID's purchase order.
She explained the ID selected the items for riot suppression
with "minimum force" and "minimum harm." The ID planned to
use the items at Hong Kong's Castle Peak Bay Immigration
Centre (CIC), a detention facility housing adult offenders
who have violated Hong Kong's Immigration Ordinance, awaiting
repatriation, removal, or deportation. The Correctional
Services Department (CSD) has operated the CIC since 2005 but
will relinquish management and operations responsibilities to
the ID in April 2010. In preparation, approximately 130
immigration officers have received training from CSD,
including use of reftel items. ID also relied on CSD for the
selection of reftel items. CSD maintains similar items in
its operational inventory.



10. (SBU) Reftel items will be stored at the CIC's armory,
currently utilized by CSD. We note reftel request did not
include the CIC address: 84 Castle Peak Road, Tuen Mun; CIC
points of contact are WS Poon, phone: (852) 3693-8352, and
Ms. Yu, phone (852) 2829-3919. BLC encouraged Ms. Yu to
contact the DDTC Response Team and notify them that the ID
would store and use reftel items at the CIC, rather than the
Immigration Tower.



11. (SBU) Although the ID purchased the articles from Props,
Props will only handle documentation and delivery
formalities. Props will not take physical possession of the
items. Should the items arrive at the CIC before the ID
takes over operations, then CSD would assume temporary
control of reftel items. As explained above, CSD currently
operates the CIC.

Import/Export Authorities and Law Enforcement


--------------------------





12. (SBU) Hong Kong's Trade and Industry Department (TID),
Strategic Trade Control Branch, is the HKG entity overseeing
the import and export of controlled commodities and
U.S.-origin defense items. TID Trade Officer C. S. Lau
informed EconOff on January 29 that Props Co. Ltd. was
properly authorized to import, broker, and/or sell defense
articles in Hong Kong. Furthermore, Lau stated Props held a
HKPF-issued arms dealer's license to "store, sell, procure,
and repair arms and ammunition on the condition that services
should only be provided to holders of a valid HKPF-issued
firearm owner's permit." Contacts from the HKPF further
confirmed to EconOff on January 29 that they maintained a
long-standing relationship with Props Co. Ltd. and described
Props as a "highly reputable entity" for the procurement of
the Force's weapons, ammunition, and non-lethal law
enforcement equipment.

Assessment


--------------------------





13. (SBU) Based on the site visits and personal interviews,
Post established the bona fides of this transaction and the
parties involved, and assessed the Hong Kong Immigration
Department as a reliable recipient of reftel items.
MARUT