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Cablegate: Taiwan: Investigations On Illegal Exports to North Korea

VZCZCXYZ0012
RR RUEHWEB

DE RUEHIN #1816/01 2220846
ZNR UUUUU ZZH
R 100846Z AUG 07
FM AIT TAIPEI
TO SECSTATE WASHDC 6335

UNCLAS AIT TAIPEI 001816

SIPDIS

SENSITIVE, SIPDIS

STATE FOR EAP/TC, ISN/ECC AND ISN/MTR
STATE PASS TO AIT/W, AIT/K

E.O. 12958: N/A
TAGS: ETTC KOMC TW
SUBJECT: TAIWAN: INVESTIGATIONS ON ILLEGAL EXPORTS TO NORTH KOREA
AND ATTEMPTED EXPORT TO IRAN

1. (SBU) SUMMARY. In recent conversations with AIT, officials at the
Ministry of Economic Affairs Bureau of Foreign Trade (BOFT)
confirmed local press reports on the investigation of a Taiwan
trading company and an Iranian businessman in Taiwan for export
control violations. The case involving the trading company, Royal
Team Corporation, for unauthorized exports of machine tools and
computer parts to North Korea has been referred to the prosecutors'
office and the case involving an Iranian businessman for attempted
export of drilling machines to Iran has concluded after a NTD 20,000
(approximately USD 606) fine was imposed against the businessman.
END SUMMARY.

2. (SBU) In the first case, BOFT officials confirmed that Royal Team
Corporation was investigated for exporting precision machine tools
and industrial computers to North Korea without authorization.
According to BOFT, the company claimed that the items were being
exported to mainland China when, in fact, the ultimate destination
was North Korea. The machine tools can be used to manufacture
military weapons and bullet shells. The machine tools and
industrial computers were on Taiwan's list of sensitive commodities
requiring licenses for exports to Iran and North Korea that went
into effect in June 2006.

3. (SBU) In a separate case, BOFT officials stated that an Iranian
businessman in Taiwan was fined NTD 20,000 (approximately USD 606)
for attempted export (note: not export as incorrectly reported in
the local press) numerically controlled drilling machines to Iran.
BOFT officials emphasized that this case shows the attention Taiwan
pays to visiting Iranian and North Korean nationals and their
activities during their stay in Taiwan.

4. (SBU) The following text is our translation of the original
Chinese-language news article on the cases which appeared in the
August 4, 2007 China Times:
Royal Team Corporation directly sold to North Korea precision
machine tools and industrial computers, which can be used to
manufacture military weapons and bullet shells, but falsely claimed
they were being sold to mainland China. The case was uncovered
through joint efforts by a foreign intelligence station and the
Investigation Bureau. This second counter proliferation case
involving military trade between Taiwan and restricted countries and
it has received international attention.
Taiwan's government has adopted trade sanctions in response to North
Korea's test firing of missiles and in order to cooperate with
international export controls and the July 2005 UN Security Council
Resolution 1695. In May last year the Bureau of Foreign Trade,
MOEA, promulgated the "Sensitive Commodity List for Items Being
Exported to North Korea and Iran" that lists over 400 items which
may not be exported to North Korea or Iran and which took effect on
1 June.
The Investigation Bureau discovered that Royal Team has been trading
with North Korea for over ten years. Within the last year, the
company has purchased computer components, precision industrial
machine tools, sharpening machines, etc. from a certain company in
Taipei and Taichung counties, which can be used to manufacture
weapons such as gun barrels and missile components. The total price
amounted to approximately NT$10 million and the items were separated
into 14 orders with customs declarations listing the mainland as the
destination. In actuality, the items were shipped directly to North
Korea by air, or to the mainland by sea where they were then sold to
North Korea.
These tools and computers are among those listed in the MOEA's
"Sensitive Commodity List for Items Being Exported to North Korea
and Iran," and the company did not apply to the Bureau of Foreign
Trade for export permit for strategic high technology commodities
(SHTC). By comparing labels, container numbers, numbers of items,
weights, and export ship names, personnel from the Marine Affairs
Field Office confirmed that these items have already been directly
exported to North Korea.
The Marine Affairs Field Office then requested that Taipei District
Prosecutor Chang Shu-hua lead the investigation and summon over 10
people for questioning, including Royal Team chairman Liu K'o-hua,
actual person in charge Liu Chen-yi, and sales manager Liu
Tung-jung. They verified that Liu Chen-yi met several times with
North Korean trade officials and representatives, and possessed
photos of those meetings.
Relevant personnel discovered that last year personnel from a North
Korean government office came to Taiwan via the mainland in order to
make purchases and last year an official from a state-run North
Korean unit visited Taipei. The Marine Affairs Field Office has
submitted the case for prosecution based on violations of the
Foreign Trade Act, Articles 13 and 21.
Separately, the Investigation Bureau found that an Iranian
businessman in Taiwan named Hsia Mo-sen [transliteration of the
Chinese] exported SHTC numerically controlled drilling machines to
Iran without a permit. He was sent to the Taipei District
Prosecutor's Office on charges of violating the Foreign Trade Act.
Prosecutors determined that Hsia Mo-sen frankly confessed his crime
and therefore deferred prosecution and imposed a fine of NT$20,000
on Hsia Mo-sen to be paid to the national treasury.

5. (SBU) COMMENT. The press coverage of the two investigations
appears to be part of Taiwan's effort to showcase its commitment to
enforce export control laws and to fully participate in United
Nations Security Council Resolutions related to Iran and North
Korea. AIT understands that these investigations received press
coverage in Japan as well. We plan to follow the Royal Team
Corporation case and will provide information on the outcome. END
COMMENT.

YOUNG

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