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Cablegate: Extrancheck: Post Shipment Verification: On Grace

VZCZCXYZ0000
RR RUEHWEB

DE RUEHHK #0314/01 0550702
ZNR UUUUU ZZH
R 240702Z FEB 10
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 9699
RHMFIUU/HQ BICE WASHINGTON DC

UNCLAS HONG KONG 000314

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: ON GRACE
TECHNOLOGIES

REF: A) BIS e-mail request 01210068 dated September 9, 2009

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) attempted
to conduct a post shipment verification (PSV) at On Grace
Technologies, Limited, Rm 201, Hi-Tech Centre, 9 Choi Yuen Road,
Hong Kong (On Grace). The items in question for this PSV are
various electronic components exported to Secom Telecom (Hong Kong)
Ltd., Unit 1701-2, Apec Plaza, 49 Hoi Yuen Road, Hong Kong (Secom)
but destined for On Grace. The exporter has classified these items
under Export Control Classification Number (ECCN) 3A001a2c. This
ECCN is controlled for national security (NS) reasons and is
eligible for shipment to Hong Kong license free but would, in
virtually all circumstances, require a license for shipment to
mainland China. The exporter is Actel of Mountain View, California.

3. Initial efforts to contact On Grace were unsuccessful. As a
result, ECO elected to pursue a meeting with Secom. According to
the Hong Kong Companies Registry, Secom has been in existence since
1997. It has the Hong Kong equivalent of USD 1250 in share capital.
Mainland nationals Xiao, Qing and Zeng, Qiang (with G24813200 and
G20968633 passport numbers) are listed as the company's directors.

4. Background research on the internet reveals that Secom markets
itself as a distributor of electronic components and test and
measurement instruments (www.secomtel.com). The company web site
lists an office in Hong Kong as well as multiple offices in various
cities throughout mainland China.

5. On December 22, 2009, ECO and Commercial Assistant Carrie Chan
visited the company and met with Mr. Ricky Ng, Administration
Supervisor. Mr. Ng stated that Secom is a distributor of components
and testing instruments. It is funded from mainland China. End
users for its products are typically OEMs and ODMs but Secom also
sells to other resellers. Mr. Ng stated that Secom avoids military
grade products to avoid export control problems. He further noted
that Secom requires end user statements from trading company
customers to protect itself against its products being shipped to
embargoed destinations. Mr. Ng stated that Secom applies for Hong
Kong strategic trade licenses when required.

6. As to the specific transaction in question, Mr. Ng stated that
the buyer was On Grace. On Grace was a regulator customer but Mr.
Ng stated that he does not know what they do and that they are no
longer a Secom customer. Mr. Ng noted that the transaction in
question was an unusual one since it was a very high value and
controlled item. Secom's Shenzhen office was responsible for the
sale but as far as Mr. Ng knows, On Grace is a Hong Kong company.
Mr. Ng stated that the salesperson responsible for the On Grace
account had left the company. He also stated that Secom was unable
to find the documents for this order since the company had recently
moved and some documents had been lost during that move (he noted
also that the transaction was quite old - 2006). Later, Mr. Ng was
also to provide (by e-mail) On Grace's end user statement stating
that the items it procured from Secom would not be used for military
or WMD purposes. ECO provided Mr. Ng with information about export
controls including a BIS brochure on reexport controls as well as
links to relevant provisions of the BIS web site.

7. FCS Commercial Assistant Carrie Chan attempted, on several
occasions, to arrange a meeting with On Grace. On Grace
representatives stated that the responsible person for this order is
no longer with the company. In addition, the company no longer has
any documentation on the order. ECO is continuing to attempt to
schedule a meeting and will report any significant information
obtained from On Grace by separate correspondence.

8. According to the Hong Kong Companies Registry, On Grace has been
in existence since 2001. It has the equivalent of USD 1 in share
capital. Hong Kong residents Kwan, Pak Chun and Pon, Chi Ying are
listed as directors with corresponding HK ID #s G122825 and
D556430). Director Kwan, Pak Chun is also a director in the
following companies: Aceco Electronics (www.aceco.cn), Gobiz
Electronics Limited (www.gobiz.com.hk), New Glory Industries
Limited, Novacom Technology Limited, and Smartway Electronics (HK)
Limited.

9. ECO recommends a close review of all shipments to Secom, On
Grace and the other related companies referenced herein. While ECO
cannot make a definitive determination on this point, ECO suspects
that Secom did not obtain the required Hong Kong import license for
this shipment. In addition, it is problematic that neither Secom
nor On Grace were able to find documentation for this particular
order nor were they able to provide any detail on the end user or


end use to which these items were put. In light of the apparent
controlled nature of these items, ECO recommends that this EUC be
considered unfavorable.

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