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Cablegate: Extrancheck: Post Shipment Verification: Soltech Industry

VZCZCXYZ0010
RR RUEHWEB

DE RUEHHK #3115/01 3650650
ZNR UUUUU ZZH
R 310650Z DEC 07
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 3766
RHMFIUU/HQ BICE WASHINGTON DC

UNCLAS HONG KONG 003115

SIPDIS

USDOC FOR 532/OEA/LHINES/ADYSON/SSILVER
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS

SIPDIS

E.O. 12958: N/A
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: SOLTECH INDUSTRY
CO LTD.

REF: A) USDOC 09957

1.Unauthorized disclosure of the information provided below is
prohibited by Section 12C of the Export Administration Act.

2. As per reftel A request and at the direction of the Office of
Enforcement Analysis (OEA) of the USDOC Bureau of Industry and
Security (BIS), Export Control Officer Philip Ankel (ECO) conducted
a post shipment verification (PSV) of Soltech Industry Co. Ltd., 1A,
Fook Ying Building, 379 Kings Road, North Point, Hong Kong
(Soltech). The items in question are two shipments of multiple
pallets of Electrica brand wire exported to Soltech on or about
September 7, 2007 and October 30, 2007 and collectively valued at
approximately USD 746,000. The items are likely not on the Commerce
Control List (EAR99) and are therefore likely only controlled to
restricted destinations and to restricted end-users/uses.
Electro-Mechanical Systems International of Philadelphia,
Pennsylvania exported the items.

3. ECO was unable to obtain contact details for Soltech using
information provided by OEA nor from independent searches of various
Hong Kong information sources. Commercial Assistant Carrie Chan was
eventually able to contact a representative of the freight
forwarding company to which the items were shipped. That company is
Conquest Express (HK) and it is the Hong Kong office of Taiwanese
freight forwarder, Conquest Express Co. Ltd. (www.conquest.com.tw).

4. According to the representative of Conquest Express in Hong
Kong, Soltech is a Taiwanese company. The representative for
Soltech with which Conquest interacts is named Amber. No last name
was given. Ms. Amber travels in the region and is not stationed in
Hong Kong. The conquest representative stated that the Hong Kong
office of Conquest Express is used as Soltech's shipment location.
Initially, Conquest Express declined to provide shipping documents
relating to the items in question.

5. Subsequently, Commercial Assistant Carrie Chan received a call
from Eddy, calling on behalf of Soltech. He stated that the Kings
Road address of Soltech noted above is actually not the headquarters
of Soltech. He stated that he lends the office address to others as
a favor. He stated he knows nothing about Soltech or the items in
question. He stated that Ms. Amber arranges for pick-up and
delivery of items on behalf of Soltech. Eddy did not provide his
full name. An address search of the Soltech address noted in the
applicable invoices and in reftel A reveals that this address is
associated with Hong Kong company Von Development Ltd.
(www.vonhk.com). Eddie Yuen is listed as the CEO of this company. A
Hong Kong Companies Registry search reveals that this company has
been in existence since 1988. Hong Kong residents Yuen, Chi Choi
and Yuen, Kwok Wing are listed as directors. Yuen, Chi Choi is also
a director of Hong Kong company, Top Way Limited. According to the
Von Development Ltd. web site, it sells various electronic switches
and power supplies. Its production facility is listed as being
located in Shenzhen, mainland China.

6. Commercial Assistant Carrie Chan subsequently received a call
from Ms. Amber, calling on behalf of Soltech. She stated that she
would be willing to meet the ECO and Ms. Chan at the offices of
Conquest Express. ECO and Ms. Chan met with Ms. Amber and Conquest
Express Branch Manager Eunice Cheung on December 6, 2007 at the
premises of Conquest Express, Flat B&C, 29/F, Tsuen Wan
International Centre, 68 Wang Lung Street, Tsuen Wan, Hong Kong.
The Conquest Express premises are located in a larger warehouse
building. One of the company's offices is in use by administrative
staff while the second serves as warehouse space for the company.
There is no signage within the building or at Conquest Express's
entrance indicating that Conquest operates at this location.

7. During the meeting, Ms. Amber stated that Soltech is not
officially registered in Hong Kong although it acts as the buying
agent for mainland Chinese company Naztech in Shenzhen, mainland
China. She stated that Naztech produces electronic components,
telecommunications products and power supplies. It acts as a
contract manufacturer but also produces products under its own brand
name. She subsequently provided additional background information
on Naz Technology Co., Ltd. in Shenzhen (Naztech) consistent with
the information provided during the interview. That information can
be found at the web site: www.nastec.net. When asked about Soltech
in Taiwan (listed as a purchaser for one of the Hong Kong bound
shipments), Ms. Amber stated that the Taiwan operation operates in
much the same way as the Hong Kong operation. When asked whether
Naztech resells any of the inputs it receives through Hong Kong, Ms.
Amber stated that she did not know. She was also unaware of the
location of the customers for Naztech's end products. Subsequent
research reveals that the Shenzhen address provided for the mainland
China production facility of Von Development Limited is the same
address as that of Naztech.


8. After some discussion about the reason for Soltech and Naztech's
corporate structure, Ms. Amber stated that this structure was
essentially a tax avoidance mechanism. Ms. Amber stated she was
quite nervous about the potential legal ramifications of such an
approach to procurement by Naztech. Despite several requests, Ms.
Amber declined to provide a business card or her full name.

9. As to the specific shipments in question, Ms. Amber stated (and
Ms. Cheung confirmed) that most of the pallets received as part of
the applicable shipments had been forwarded to Shenzhen. When asked
for shipping or other documents confirming such shipment, Ms. Cheung
left the room and subsequently provided receipts indicating that 13
skids of electrical wire had been turned over to Soltech. The
receipts included what appeared to be the Soltech seal but no
signature. They also included no defining details about the skids
or whether they had actually been shipped to Shenzhen. Ms. Amber
stated that Naztech had arranged for a freight forwarder to pick up
the skids from Conquest Express. When asked why Conquest would
accept unsigned documents for electrical wire valued at several
hundred thousand USD, Ms. Cheung stated that she is not in position
to determine the actual makeup of the wire and therefore does not
require more specificity in the documents. ECO does not believe
this statement to be credible.

10. Ms. Cheung and Ms. Amber subsequently showed ECO and Ms. Chang
the remaining 19 skids of wire located in the warehouse portion of
the Conquest Express premises. Ms. Amber stated that the wire is
used in cable television wiring related products.

11. ECO provided Ms. Amber and Ms. Cheung with information about
U.S. reexport controls, stressing that shipments to embargoed
destinations may be subject to special licensing requirements. Both
Ms. Amber and Ms. Cheung agreed to closely review the information.

12. Ms. Amber's explanations concerning Soltech and Naztech's
operations are consistent with procurement channels that make use of
Hong Kong's free port status to minimize mainland Chinese import
duties and other taxes. Nonetheless, ECO did not find Ms. Amber and
Ms. Cheung's presentations to be credible and recommends close
scrutiny be given to any shipments to Soltech, Conquest Express, Von
Development Limited, Naztech and to their respective addresses.

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