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Cablegate: Taiwan: Results of Blue Lantern Pre-License 050055470

VZCZCXYZ0000
PP RUEHWEB

DE RUEHIN #1942/01 2360439
ZNR UUUUU ZZH
P 240439Z AUG 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 6518
INFO RUEAIIA/CIA WASHDC
RUCPDOC/USDOC WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RUEPINS/HQ BICE INTEL WASHINGTON DC

UNCLAS AIT TAIPEI 001942

SIPDIS

SENSITIVE, SIPDIS

STATE FOR EAP/TC, ISN/MTR, PM/DTCC FOR BLUE LANTERN COORDINATOR JUDD
STITZIEL, AIT/W

E.O. 12958: N/A
TAGS: ETTC KOMC TW
SUBJECT: TAIWAN: RESULTS OF BLUE LANTERN PRE-LICENSE 050055470

REF: STATE 106998

1. (SBU) Per reftel, AIT/T visited the foreign consignee, Yang
Technology Co., Ltd., and contacted the end user, Taiwan ROC ORDC
Army Logistics Command. Based on information gathered and on-site
interview, the subject business transaction appears to be
legitimate.

Taiwan Army:

2. (SBU) AIT/T contacted Mr. Chung, Cheng-Chen, Commodity Management
Office of the Taiwan ROC ORDC Army Logistics Command. Mr. Chung
stated that he is very familiar with Yang Technology and that Yang
Technology has been doing business with the Taiwan Army for many
years. Mr. Chung further explained that Yang Technology is
considered to be a recognized/official supplier/contractor for the
Taiwan Army and the Ministry of National Defense.

3. (SBU) Mr. Chung confirmed the type of commodity ordered and
stated that the Army ordered two of the subject commodity. Mr.
Chung further confirmed that the subject commodity would be used for
maintenance of U.S.-made M48 tanks.


Yang Technology:

4. (SBU) On August 17, 2007, an AIT/T officer visited Yang
Technology located at 2-16 Alley 31, lane 581, Yuan-sha Road,
Chung-ho City, Taipei County, the same location as indicated on the
license application. We met with Mr. Yang, Chi-Chang, President, and
Mr. Yang, Y.C., Vice President (collectively referred to as Yang
Technology officials). During the visit, the AIT/T officer examined
the contract between the Taiwan Army and Yang Technology; the
purchase order from Yang Technology to Flight Source Inc., the U.S.
exporter; and the end-use statement for the export license. The
commodity and the end-use information on these documents matched the
license application information provided in reftel. However, the
quantity under contract with Taiwan Army did not match the quantity
ordered from Flight Source. The contract between the Army and Yang
Technology is for two bearings and the purchase order between Yang
Technology and Flight Source is for six bearings.

5. (SBU) When asked to explain the discrepancy in quantity, Yang
Technology officials explained that the company ordered the extra
bearings as spares in case of damage during installation or testing.
Extra bearings would be stored by the company for later use. Since
the Taiwan Army is conducting a 10-year maintenance program for the
M48 tanks, the spares would be used for next year's maintenance
contract. Yang Technology officials stated that the company ordered
the extra parts to save shipping costs for this low-value item.

6. (SBU) Yang Technology officials explained the storage and
handling procedures in its warehouse. According to Yang Technology
officials, the company has its headquarters in Taipei and has a
warehouse in Taichung city. Items imported from the United States
are shipped directly to Taichung for assembly and then sent to
end-users. For low-value and physically small items such as subject
bearings, the company will store them in a small warehouse that is
part of its Taipei office.

7. (SBU) For the Taipei warehouse, when an item in the warehouse is
needed, a delivery slip is prepared by a staff; the President or the
Vice President then approves the delivery; the item is shipped to
Taichung for assembly; and an entry made into the computer inventory
system. The company also conducts a monthly physical inventory
which is reconciled with the computer inventory system. For the
Taichung warehouse, the processing is similar except for the
shipment part. This warehouse is monitored by an electronic
security system. Yang Technology officials added that the warehouse
in Taichung is used to store bulk items and to assemble parts before
delivery to end-user.

8. (SBU) Yang Technology was established on 1984 as a sole
proprietorship. Its primary business line was the manufacture of
hardware, goods, and components for the automobile industry. Mr.
Yang, Chi-Chang was the principal of the company. In 1989, the
company changed its business line to be a contractor to the Taiwan
Army. It also changed its corporate status to a limited liability
corporation. The Taiwan Army continues to be its sole customer.

9. (SBU) Yang Technology has fourteen employees in its Taipei office
and eight in Taichung. It has seven shareholders and four officers:
a chairperson, general manager, vice president and treasurer.

10. (SBU) Yang Technology officials stated they are familiar with
U.S. rules on munitions controls, especially prohibitions against
unauthorized re-transfers and re-exports. They expressed concerns
regarding the length of time it takes to get a U.S. license and
requested speedy decision on this license application.

11. (SBU) Based on the site visit and information gathered from the
Taiwan Army, Yang Technology appears to be reliable recipient of
USML items.

YOUNG

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