41910  10/4/2005 8:27            05TAIPEI4068            American Institute Taiwan, Taipei          SECRET            05AITTAIPEI1780|05STATE113697 "This record is a partial extract of the original cable. The full text of the original cable is not available.

"           "S E C R E T SECTION 01 OF 02 TAIPEI 004068

SIPDIS

DEPT FOR EAP/TC, NP/CBM AND NP/ECC

E.O. 12958: DECL: 10/03/2015

TAGS: ETTC, PARM, PINR, PREL, PTER, TW, SY, PK

SUBJECT: MTAG: TAIWAN INVESTIGATION RESULTS ON XTRA AND SHE

HONG

REF: A. TAIPEI 1780

B. STATE 113697

Classified By: AIT Director Douglas H. Paal, Reason 1.4 b/d

1. (S) On June 21, 2005, AIT ECONOFF Steve Lang visited the Board of Foreign Trade (BOFT) seeking assistance in investigations on two domestic manufacturers Xtra Industrial Corporation and She Hong Industrial Co., Ltd.   On September 27, 2005, AIT received response with detailed result of the following.

2. (S) Begin Letter Text.

From: BOFT

To: AIT Economic Section

Letter date: September 23, 2005

Letter number: Mao Yang Fu Tzi 09401513000

Subject: Report on BOFT's investigations of Xtra Industrial Corporation and She Hong Industrial Co. Ltd. who might export machine tools to Syria and Pakistan respectively.

Explanations:

--1. According to information provided by AIT's Economic Officer Steve Lang on June 21, 2005.

(1) Pakistani manufacturer ""Mechanical Engineering Workshop (MEW)"" possibly purchased 14 sets of ""hydraulic cylinders"" from Xtra Industrial Corporation in March 2005, from Taiwan-based Design Engineering Center (DEC) transferred to Pakistan's National Development Complex (NDC) for research and development of short-mid range missiles.

(2) Syrian manufacturer ""TDC Kaddour and Madani Co."" purchased four-axis vertical machine tools which were probably exported in November 2004.   Reports indicated that TDC again purchased 2 machine tools in early 2005 and these two machines were likely exported in May 2005.

--2. BOFT's investigation results:

(1) Xtra Industrial Corporation exported 14 sets of ""Oil Seal Kit for Hydraulic Cylinder"" to Pakistani MEW on May 23, 2005.    These commodities were not in the Strategic High-Tech Commodity (SHTC) list, and Pakistan is not in our export controlled areas.    Plus, the subject company MEW is not on the U.S. Denied Persons List, Unverified List, Entity List, nor on Japan's End User List.    Therefore, the subject export case did not violate Taiwan's SHTC export control regulations.

(2) Regarding the possibility that She Hong exported four- axis machine tools to Syrian company TDC Kaddour and Madani Co. in November 2004 and May 2005, BOFT's investigation indicated that although there were eleven records of machine-tool exports in 2004 from She Hong to Syria, none of the Syrian importers of these machine tools were TDC. In addition, these subject machine tools were not SHTC commodities, and these importers were not on any of the U.S. and Japan's black list of manufacturers.   The exporting documents and references were forwarded to the U.S. via AIT Economic Section in April 2005 to verify suspicious importers (reported ref A).    The investigation also showed that She Hong did not export machine tools to Syrian TDC Kaddour and Madani Co. in May 2005.

--3. To prevent these subject manufacturers from engagement in weapons proliferation, BOFT has taken the following measures:

(1) Officially requested that the Directorate General of Customs (DGC), Ministry of Finance, prevent Xtra and She Hong from illegally exporting SHTC by including Xtra and She Hong in the Customs' high-risk management list, and strengthen inspections of their exporting commodities and trading partners.

(2) Informed Xtra and She Hong in writing that in the future Xtra needs to apply for SHTC export permits prior to exporting commodities to Pakistani MEW, DEC and NDC; and She Hong needs to apply for SHTC export permits before exporting goods to Syrian TDC Kaddour and Madani Co.  BOFT also requested that all related permit issuing agencies comply with these control measures.

(3) To include Xtra and She Hong in the 2005 SHTC regular inspection target list, so as to prevent these two manufacturers from evading the SHTC export control.

End Letter Text.

PAAL

PAAL

"