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Viewing cable 08HONGKONG966, EXTRANCHECK: PRE-LICENSE CHECK: FREE COMPONENTS
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08HONGKONG966 | 2008-05-28 09:15 | 2011-08-23 00:00 | UNCLASSIFIED | Consulate Hong Kong |
VZCZCXYZ0007
RR RUEHWEB
DE RUEHHK #0966/01 1490915
ZNR UUUUU ZZH
R 280915Z MAY 08
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 4967
RHMFIUU/HQ BICE WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 2246
UNCLAS HONG KONG 000966
USDOC FOR 532/OEA/LHINES/ADYSON
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS
BEIJING FOR FCS ECO JEANNETTE CHU
SIPDIS
E.O. 12958: N/A
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: PRE-LICENSE CHECK: FREE COMPONENTS
REF: A) USDOC 02727 (2008) B) D395732 C) HK00843 (2008) D) HK 03094
(2007) E) HK 00001 (2008) F) HK02563 (2007) (G) HK 01953 (2005) H)
HK 00909 (2006)
¶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 combination pre-license check (PLC) and Post Shipment Verification
(PSV) of Free Components Co. Ltd., Unit 7401A/26 F, DMK-IN
Commercial Centre, Fo Dundai St., Mong Kok, Hong Kong (Free
Components). The items in question for the PLC are 350 SRAM memory
arrays valued at USD 16,000 and which are that subject of BIS
license application D395732. Additionally, the PSV concerns four
shipments of Actel A42MX36-1CQ208B integrated circuits that were
ordered by Free Components from Singapore company Tecnomic
Processors Pte. Ltd. and that are the discussed in further detail in
reftel C. All of the items are classified under Export Control
Classification Number (ECCN) 3A001 and are controlled for national
security (NS) reasons. Austin Semiconductor, Inc. of Austin, Texas
is the license applicant for the PLC and Tecnomic was the reexporter
in relation to the four additional PSV related shipments.
¶3. A review of the Hong Kong Companies Registry reveals that Free
Components has been in existence since July 2006. Its paid-up share
capital is the Hong Kong equivalent of USD 12. Its sole director is
listed as mainland Chinese national Hu, Yanhui, resident of Yin
Chuan City, Ningxia and mainland identification card holder with
number 640102198501091515. Its sole shareholder is listed as
mainland national Chen, Yanjie of Shenzhen, mainland China. The
registered address of Free Components, namely 2401A Park-In
Commercial Center, 56 Dundas Street, Hong Kong, is located at the
offices of SBC International (a company secretarial service). As
detailed further below, Free Components is affiliated with a range
of additional companies in Hong Kong and mainland China, many of
which are claim to be active in trading various military grade
integrated circuits and other military grade components.
¶4. According to the web site of Free Components
(www.freeicforum.com), the company is one of the major stocking
distributors of electronic components in China. The web site
further states that Free Components is expanding its focus on
hard-to-find and obsolete military, industrial or commercial grade
components. The company states it also has several offices in China
including in Shenzhen, Beijing, Xian, Chengdu and Cixi besides its
Hong Kong office.
¶5. A review of the Free Components web site reveals that it is not
located at the address provided in reftel A but rather at 2401A
Park-In Commercial Center, 56 Dundas Street, Mongkok (the registered
address noted above). A Ms. Chan agreed to meet at a different
address, namely Room 503, Grand City Plaza, 1 Sai Lau Kok Road, Hong
Kong. A review of the PSV related purchase orders obtained from
Tecnomic reveal an additional address in the Grand City Plaza,
namely Room 1702.
¶6. On May 21, 2008, ECO and Commercial Assistant Carrie Chan
visited the company and met with Ms. Chan. She had no business
cards to share with the ECO and stated that she was merely a clerk.
The office is located in a quiet office building. There is no
reference to Free Components on the building directory or on the
door of the office. It is a one-room office with a desk, phone and
a stack of boxes against one wall. Ms. Chan appears to work alone
in the office although a sign apparently used when Ms. Chan is out
of the office (and laying on a table in the room) tells visitors to
visit room 1702 if room 503 is vacant.
¶7. Ms. Chan stated that her office acts as the receiving point for
shipments received from abroad. Upon receipt of packages, she
informs her principals in Shenzhen that the packages have arrived.
The Shenzhen office is responsible for receiving orders and payments
and sourcing products. When payment is received from customers, the
Shenzhen office informs the customer and that customer typically
arrives at the offices of Free Components to pick up the items (over
ninety percent of all packages are handled in this way). In other
cases, Free Components delivers the items to the customer, typically
by courier. Ms. Chan claimed ignorance of customer names and
end-uses of the items Free Components receives. She stated that the
Park-In Commercial Center address is the registered address of the
company.
¶8. When asked about the specific transactions and the order in
question, Ms. Chan stated that neither she nor her superiors knew
anything about the order to Austin Semiconductor and had no further
information to provide on that issue. As to the shipments from
Tecnomic, Ms. Chan stated that she only had one document relating to
the final disposition of those items. That document (a copy of a
simple invoice) lists Feson Technology Limited as the buyer of two
of the Actel ICs. No address is given on the document for this
company and it appears that the company picked up the items from
Free Components. Ms. Chan had no further information to provide on
this company other than her belief that it is located in mainland
China. No such company with that name could be found in the Hong
Kong Companies Registry. As to the remaining shipments from
Tecnomic, Ms. Chan stated that all documents for those shipments had
been sent back to Shenzhen and that she had been unable to obtain
those from Shenzhen. She went on to say that the files are
typically kept in a warehouse and then are unavailable. This is
purportedly to keep sales agents from leaving the company with
customer names and contact details. ECO did not find her answers on
this point to be credible. No additional information on the final
disposition of these shipments was forthcoming.
¶9. The conversation then turned to a range of Hong Kong and
mainland Chinese companies that appear to be related to Free
Components and which are themselves engaged in trading in
electronics components. As noted below, many of those companies
claim to trade in military grade electronic components and some show
images of warships, fighter jets and missiles on their web sites. A
listing of the companies follows as well as a short explanation of
their relationship to Free Components and to each other.
¶10. Sur-Link Technology (H.K.) Limited (Sur-Link HK): A review of
the Hong Kong Companies Registry reveals that Sur-Link HK has been
in existence since 2003. It has paid-up share capital is the Hong
Kong equivalent of USD 1200. Its sole director is listed as mainland
Chinese national Chen, Renyi with mainland Chinese passport number
G05120674. Chen, Renyi is also a director in Italy Fegour Electric
(International) Holdings Limited with Cen, Gengqiang who holds
mainland Chinese passport number G11990438. Sur-Link HK's
registered address and actual premises are located in the same
building as Free Components (the Grand City Plaza Address) but on
the 17th floor. Invoices relating to the PSV shipments list the
17th floor office of Sur-Link as the offices of Free Components. A
review of Sur-Link's web site (www.surelink-ic.com) reveals that
this company's China affiliate office is located at the same address
in Shenzhen as Free Components (No. 4019 Shennanzhong Rd., Shenzhen
- an office building developed by China Aerospace Science and
Industry Group (CASIC)). It also states that Sur-Link HK is
expanding internationally including into Iran. Ms. Chan confirmed
during the meeting that Sur-Link HK and other companies noted herein
are owned by a common group of owners. Additionally, she stated
that she had heard that Sur-Link has an office in Dubai. By
subsequent phone call the next day, Ms. Chan stated that the
companies were not related. ECO notes that U.S. Company QP
Semiconductor (www.qpsemi.com) lists Sur-Link HK as its authorized
distributor/representative. According to QP Semiconductor's web
site, it is a fabless semiconductor firm serving the military,
aerospace and high reliability industries.
¶11. CTC International (Hong Kong) Limited (CTC HK): A review of
the Hong Kong Companies Registry reveals that CTC HK has been in
existence since 2003. Its paid-up share capital is the Hong Kong
equivalent of USD 250,000. Its directors are listed as mainland
Chinese national Cen, Chongping (also listed as Cen, Chong Ping)
with mainland passport number G03363416 and Hong Kong resident Chan,
Lee Na with Hong Kong identity card number K155636(3). The
directors are also the company's shareholders. Cen, Chongping is
also the director of H.K. Xing Hang Yuan Int'l Company Limited
(discussed below). According to this company's web site,
(www.ctc-ic.com), the company is also able to source military grade
ICs from Intersil, IVG, Avago, Maxim, AD and others. It claims a
Hong Kong and Shenzhen office. The Shenzhen office is located at
the same address as the Shenzhen offices of Sur-Link and Free
Components. Ms. Chan confirmed during the meeting that CTC HK and
other companies noted herein are owned by a common group of owners.
By subsequent phone call the next day, Ms. Chan stated that the
companies were not related.
¶12. H.K. Xing Hang Yuan Int'l Company Limited (HK XHY): A review
of the Hong Kong Companies Registry reveals that HK XHY has been in
existence since 2000. Its paid-up share capital is the Hong Kong
equivalent of USD 1,200. Its directors and shareholders are listed
as mainland Chinese national Cen, Chong Ping with mainland passport
number G03363416 (also a director in CTC HK) and mainland Chinese
national Chen, Yan Jie with mainland passport number G22619671.
Various web searches for this company linked back to the Free
Components web site. On other web sites, the company claims to be a
supplier of military products for use in aviations, weapons and
shipping. Ms. Chan confirmed during the meeting that HK XHY and
other companies noted herein are owned by a common group of owners.
By subsequent phone call the next day, Ms. Chan stated that the
companies were not related. Some of the invoices from the Tecnomics
order list Free Components as the bill-to address while listing HK
XHY as the ship-to address. HK XHY was the subject of a previous
unfavorable PSV discussed in reftel G (01953) and corresponding
administrative enforcement action against the Taiwanese reexporter
involved in that case.
¶13. Other internet searches revealed an apparent link between Free
Components, CTC HK, HK XHY and Sur-link (and their mainland
counterparts) and a series of companies described in reftel D,
namely Hongtu Hangyan Electronic (HK) Co. and Ziheng International
Electronics Co. as well as affiliated companies in Shenzhen
including Shenzhen Hongtu Hangyang Technology Co. Ltd., Shenzhen
Xinghangyang Technology Co., Ltd., Shenzhen Star-Navi Technology Co.
and Beijing Hongtu Mingli Technology Trading Co. Ltd. The Shenzhen
addresses of these companies are located in the same building as
those of the companies listed above (Free Components, CTC HK, XHY HK
and Sure-Link HK) but on a different floor. Web research suggests
that Shenzhen Star-Navi is actually the holding company for
companies in the Hongtu Hangyang group. When asked about some of
these companies, Ms. Chan stated that she had heard of Ziheng but
had not done business with it. She stated that she had shipped
product to Hongtu Hangyang Technology Co. Ltd. although she was
unfamiliar with Beijing Hongtu Mingli. She stated that Shenzhen
Star-Navi Technology Co. was actually another English language name
for Xing Hang Yuan (referenced in the immediately preceding
paragraph).
¶14. ECO further notes that the registered address of Free
Components (in the Park-In Commercial Center) is located at the
offices of SBC International (a company secretarial service). That
address is also the registered address of Victory Wave Holdings, the
subject of previous unfavorable PSVs referenced in reftels E and F
and likewise involving suspected diversion of national security
controlled items to mainland China. In Reftel E, the representative
of Victory Wave stated that the particular items referenced in that
check (EAR99 items) were destined to Shenzhen Hongdu Industry Co.
(referenced above and apparently related to Free Components and the
other companies noted herein). Other companies related to Victory
Wave (and referenced in reftel E including Exodus Microelectronics
Company Limited, Echelon Microsystems Limited and Omniway Technology
Limited) have been registered by SBC International in Hong Kong as
have Sur-Link HK, Italy Fegour (referenced in paragraph 10 above),
CTC HK, XHY HK, and Free Components. As noted in reftel F, Victory
Wave is related to another Hong Kong company, namely Centre Bright
which was placed on the BIS Unverified List in light of its
problematic business practices (that PSV is detailed in reftel H).
¶15. An initial review of Shippers Export Declarations (SEDs)
listing the address of Free Components and CTC HK (both in the Grand
City Plaza office building) reveals substantial shipments of
electronic components to the Grand City Plaza addresses noted above
(associated with Free Components and others) as well as additional
companies and individuals that have received shipments, namely Able
Components Co. Ltd., Ms. Cristy Chou and ARI International Co. Ltd.
Able Components is not listed in the Hong Kong Companies Registry.
ARI International Co. Ltd. is a new company registered in February
¶2008. It has no paid up share capital. Its sole director and
shareholder is mainland national Zhou, Lujun. Its registered
address is also at SBC International, 2401A Park-In Commercial
Center, 56 Dundas Street, Hong Kong (as with Victory Wave, Free
Components and others). An additional two companies, located on the
7th floor of the Grand City Plaza office building, are also in
receipt of various electronics related components. They are Maxlink
Industries Ltd. and Seatech International.
¶16. Recommendations: ECO recommends that OEA conduct a thorough
review of all shipments to the various Hong Kong companies (and
related addresses) listed herein to determine whether controlled
commodities have been shipped to these companies as it is highly
likely that those commodities have been transshipped to mainland
China. Also, ECO recommends that BIS consider conducting outreach
visits at exporters (including, especially, QP Semiconductor) that
have shipped items to these companies, particularly those that list
both a commercial and military production capability. (ECO note:
Subject to some limited exceptions, most commercial items that are
not controlled for export to China may be sold to virtually all
end-users in China). ECO further recommends that OEA consider a
review of shipments of controlled commodities to all of the Hong
Kong addresses of SBC International as ECO suspects that additional
procurement entities may be using SBC addresses as their business
premises (www.sbc.com.hk). Additionally, ECO recommends that BIS
consider placing Free Components, CTC HK, Sur-Link HK, XHY HK, Able
Components Co. Ltd. and ARI International Company Limited on the
Unverified List (this is in addition to earlier recommendations that
other companies related to these companies be added to the
Unverified List). Finally, ECO recommends that BIS prepare commodity
classifications for the items involved in this PSV so that ECO may
approach the Hong Kong government to appraise it of potential
violations of HK law related to likely failure by the companies in
question to obtain required Hong Kong licenses.
Cunningham