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Cablegate: Extrancheck: Post Shipment Verification: Leader Mutual

VZCZCXYZ0004
RR RUEHWEB

DE RUEHHK #0033 0060859
ZNR UUUUU ZZH
R 060859Z JAN 10
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 9341
RHMFIUU/HQ BICE WASHINGTON DC

UNCLAS HONG KONG 000033

USDOC FOR 532/OEA/ MCANNER
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR PATRICK SANTILLO
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS

SIPDIS

E.O. 12958: N/A
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: LEADER MUTUAL
FREIGHT SYSTEM

REF: A) BIS e-mail request dated November 19, 2009 (01210097)

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) at Leader Mutual Freight System,
1 Sheung Hei Street, San Po Kong, Hong Kong (Leader Mutual). The
items in question for this PSV are three shipments of SRAM and
memory cards exported to Leader Mutual on or about September 4, 2009
and July 23, 2009 (two shipments). These items are likely
classified under Export Control Classification Number EAR99, meaning
that they are likely eligible to be shipped license free worldwide
except to sanctioned destinations and certain restricted
end-uses/users. The exporter was Dane-Elec Corporation of Irvine,
California.

3. According to the Hong Kong Companies Registry, Leader Mutual has
been in existence since 1997. Its paid up share capital is the Hong
Kong equivalent of approximately USD 650,000. The Hong Kong
Companies Registry lists one Taiwanese national, one U.S. national
and two Hong Kong residents as directors.

4. According to the company's web site (www.Leader-Mutual.com.hk),
Leader Mutual is an international freight forwarder with offices
throughout China and the United States.

5. On December 22, 2009, ECO and FCS Commercial Assistant Carrie
Chan visited the company at the address noted above and met with Ms.
Karen Chu, Logistics Manager. She provided additional background
about the company (consistent with information on its web site).
Ms. Chu stated that Leader Mutual is as a freight forwarder and also
acts as a type of consolidator/warehouse for companies in Hong Kong
or for overseas companies that don't have a physical presence in
Hong Kong. According to Ms. Chu, Leader Mutual ships worldwide.

6. As to the specific shipments in question, Ms. Chu stated that
Leader Mutual acts as the warehouse and consolidator for the
exporter's Hong Kong operations (Dane-Elec Memory Asia Limited)
pursuant to a written agreement with Dane-Elec. According to Ms.
Chu, Dane-Elec requires that Leader Mutual hold product for
Dane-Elec's customers (whether in Hong Kong or abroad). Those
customers then come to Leader Mutual to pick up the items or direct
Leader Mutual to ship the items to their location in Taiwan or
elsewhere. Ms. Chu stated that one reason for such an approach to
sales is that it makes the customer responsible for any tax or
similar payments when shipping to mainland China and other
destinations (Hong Kong, conversely, is a free port and does not
impose import duties, VAT or similar levies).

7. As to the particular shipments in question, Ms. Chu stated that
they had been received and disbursed to various Hong Kong customers
at the direction of Dane-Elec. Ms. Chu provided documentation
confirming delivery to Dane-Elec customers including Nexus
Technologies (H.K.) Ltd. and Koh Electronic Technology Pte. Ltd.
(www.kohelec.com). These companies appear to be further Hong Kong
and Singapore based resellers of computer memory. As the items are
not highly controlled and may be shipped license free to virtually
all destinations and consignees, ECO did not contact the resellers
to frther determine their eventual customers. ECO maydo so if OEA
so desires.

8. ECO provided Ms. hu with information about U.S. export controls
(including the BIS brochure on reexport controls). By follow-up
e-mail, Ms. Chan provided additional information about BIS lists to
check and other export control information. Ms. Chu promised to
review the information closely and share it with her colleagues.

9. ECO believes Leader Mutual to be a suitable recipient of U.S.
origin technology (as freight forwarder). Nonetheless, given what
appears to be relatively limited knowledge of U.S. export controls
at a company with a significant U.S. presence, ECO recommends that
BIS conduct an outreach at Leader Mutual's U.S. operations to
provide information about export controls to those operations as
well.

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