VZCZCXRO1986
PP RUEHCN RUEHGH
DE RUEHHK #2378/01 1591059
ZNY CCCCC ZZH
P 081059Z JUN 06
FM AMCONSUL HONG KONG
TO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 7165
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 8840
RUEHUL/AMEMBASSY SEOUL PRIORITY 2548
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 2937
RUEHKO/AMEMBASSY TOKYO PRIORITY 4110
RUEHCN/AMCONSUL CHENGDU PRIORITY 0838
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 9823
RUEHGH/AMCONSUL SHANGHAI PRIORITY
RUEHSH/AMCONSUL SHENYANG PRIORITY 3329
RUEHIN/AIT TAIPEI PRIORITY 3923
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEAORC/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 05 HONG KONG 002378 
 
SIPDIS 
 
SIPDIS 
NOFORN 
 
STATE FOR EAP/CM AND NP/ECS 
USDOC FOR U/S MCCORMICK AND THAUSER, A/S JACKSON 
 
E.O. 12958: DECL: 06/08/2031 
TAGS: ETTC EBMGT BEXP PTER HK
SUBJECT: SUMMARY OF THE ELEVENTH ROUND OF U.S.-HONG KONG 
BILATERAL EXPORT CONTROL DISCUSSIONS 
 
REF: HONG KONG 2317 
 
Classified By: SIMON SCHUCHAT, E/P CHIEF.  REASONS: 1.4 (B,D,E). 
 
¶1. (C) ON 16-18 MAY 2006, THE HONG KONG TRADE AND INDUSTRY 
DEPARTMENT (TID) AND CUSTOMS AND EXCISE (CUSTOMS) DEPARTMENT 
HOSTED THE U.S. DEPARTMENT OF COMMERCE BUREAU OF INDUSTRY AND 
SECURITY (BIS) FOR THE 11TH U.S. ) HONG KONG BILATERAL 
EXPORT CONTROL DISCUSSIONS UNDER THE 1997 AGREED MINUTE.  THE 
AGREED MINUTE ) SIGNED BY THEN SECRETARY OF COMMERCE DALEY 
AND HONG KONG TRADE SECRETARY DENISE YUE ) CALLS FOR REGULAR 
DISCUSSIONS TO EXCHANGE INFORMATION ON EXPORT CONTROLS AND 
ENHANCE COOPERATION.   UNDER SECRETARY OF COMMERCE FOR 
INDUSTRY AND SECURITY DAVID MCCORMICK and TID 
DIRECTOR-GENERAL RAYMOND YOUNG opened the discussions on May 
¶16.  Assistant secretary for export enforcement darryl w. 
jackson and tid deputy director general clement leung chaired 
the three-day talks, which included presentations on EXPORT 
CONTROL UPDATES.  the U.S. delegation toured HONG KONG,S 
BOUNDARY CONTROL SYSTEMS INCLUDING LAND, PORT, AND AIRPORT. 
END SUMMARY. 
 
DAY ONE - VISIT TO KWAI CHUNG CONTAINER TERMINAL. 
 
¶2. (C) AFTER A BRIEFING AT THE U.S. CONSULATE, ASSISTANT 
SECRETARY FOR EXPORT ENFORCEMENT DARRYL JACKSON AND 
 
SIPDIS 
DELEGATION MET WITH HONG KONG CUSTOMS PORT AND MARITIME 
COMMAND (PMC) OFFICIALS TO DISCUSS THE HONG KONG CUSTOMS 
OPERATION AT THE KWAI CHUNG CONTAINER TERMINAL.  PMC 
OFFICIALS EXPLAINED THAT A TYPICAL CARGO EXAMINATION AND 
CLEARANCE TOOK LESS THAN TWO DAYS.  PMC OFFICIALS NOTED THAT, 
IN 2005, IT EXAMINED 477 CONTAINERS, INVOLVING CONTROLLED 
COMMODITIES SUCH AS CANNABIS, CIGARETTES, IVORY, AND 
COUNTERFEIT GOODS.  A/S JACKSON ALSO RECEIVED A BRIEFING ON 
THE HONG KONG INTERNATIONAL TERMINAL'S INTEGRATED CARGO 
INSPECTION SYSTEM (ICIS) AT THE HUTCHISON PORT 
HOLDINGS-OPERATED TERMINAL. 
 
DAY ONE - OPENING PLENARY 
 
¶3. (C) TRADE AND INDUSTRY DEPARTMENT (TID) DIRECTOR-GENERAL 
RAYMOND YOUNG CITED THE GROWING CONCERN about WEAPONS OF MASS 
DESTRUCTION (WMD) AND THE NEED TO CONTINUE TO PURSUE EXPORT 
CONTROL AGREEMENTS WITH ITS TRADING PARTNERS.  AS A SEPARATE 
CUSTOMS TERRITORY UNDER THE &ONE COUNTRY, TWO SYSTEMS8 
PRINCIPLE, HONG KONG WAS COMMITTED TO A STRONG EXPORT CONTROL 
SYSTEM.  HONG KONG HAS COOPERATED CLOSELY WITH THE U.S. IN 
THE PAST, WITH BOTH SIDES COMMITTED TO SHARING INFORMATION. 
Young ALSO NOTED THE CLOSE COOPERATION tid had enjoyed WITH 
THE U.S. EXPORT CONTROL OFFICER (ECO) IN HONG KONG AND LOOKED 
FORWARD TO THE NEW ECO ARRIVING SUMMER 2006.  BOTH 
ENFORCEMENT AND PREVENTION WERE NECESSARY COMPONENTS OF A 
COMPREHENSIVE EXPORT CONTROL POLICY; JOINT OUTREACH TO TWO 
LOCAL UNIVERSITIES WAS A GOOD EXAMPLE.  HE CONCLUDED BY 
NOTING THE NEED TO MAINTAIN A CLOSE WORKING PARTNERSHIP WITH 
THE U.S. 
 
¶4. (C) UNDER SECRETARY OF COMMERCE FOR INDUSTRY AND SECURITY 
david mccormick expressed appreciation for the candid and 
collegial relationship between the U.S. and Hong Kong in the 
area of strategic trade, allowing both sides to address 
issues quickly and improve export control regimes. He added 
that BIS was involved in several other activities aside from 
investigations, such as studies on how to improve the U.S. 
export control system, the Committee on Foreign Investments 
in the U.S. (CFIUS), securing the U.S. defense industrial 
base, and the President's Technology Leadership Agenda, which 
governs foreign researchers' participation in U.S.-based 
high-technology research. U/S MCCORMICK ALSO HIGHLIGHTED THE 
FACT THAT HE OFTEN USES HONG KONG AS A MODEL FOR EXPORT 
CONTROL WHEN SEEKING TO EXPAND EXPORT CONTROL MEASURES IN 
OTHER COUNTRIES. 
 
¶5. (C) Young replied that cooperation has deepened since the 
U.S. and Hong Kong signed the bilateral export control 
 
HONG KONG 00002378  002 OF 005 
 
 
agreement in 1997.  Unfortunately, those wanting to evade 
export controls have ALSO become more sophisticated.  several 
factors WERE NEcessary TO MAINTAIN a healthy relationship. 
The first was information exchange at the annual export 
control discussions.  The second was the need to review past 
and future law enforcement needs.  The third was that each 
side must investigate independently potential violations. 
 
¶6. (C) A/S JACKSON REVIEWED THE ROLE THE AGREED 1997 MINUTE 
HAS PLAYED IN FOSTERING LEGITIMATE TRADE OVER THE PAST TEN 
YEARS.  JACKSON NOTED THAT WHILE THE TRADING PARTNERS WORKED 
TOWARDS LEGITIMATE GOALS OF GOODWILL, THERE WERE OTHERS WHO 
CONTINUED TO TRY TO CIRCUMVENT SUCH EFFORTS TO PURSUE THE 
PROLIFERATION OF WMD.  THIS REQUIRED MORE EXPORT CONTROL 
VIGILANCE ON BOTH SIDES.  A/S JACKSON STATED A COMPREHENSIVE 
APPROACH ON INTERNATIONAL COOPERATION AND COLLABORATION WAS 
IMPORTANT, BUT EQUALLY IMPORTANT WAS THE ABILITY TO ACT 
INDEPENDENTLY ON INVESTIGATIONS.  A/S JACKSON COMMENTED THAT 
THE U.S. RELIED UPON HONG KONG TO INITIATE INVESTIGATIONS IN 
THE EXPORT CONTROL ARENA AND THIS TYPE OF PRO-ACTIVE POLICY 
WOULD PREEMPT VIOLATORS BEFORE THEY COMMITTED OFFENSES. 
 
HONG KONG UPDATE AND LATEST DEVELOPMENTS 
 
¶7. (C) TID DEPUTY DIRECTOR-GENERAL (DDG) LEUNG PROVIDED A 
BRIEF UPDATE ON MAJOR DEVELOPMENTS IN THE HONG KONG EXPORT 
CONTROL ARENA.  HE CITED THE CURRENT LEGISLATIVE AMENDMENT 
BEING REVIEWED IN THE HONG KONG LEGISLATIVE COUNCIL (LEGCO) 
WHICH INCLUDED NEW ADDITIONS TO MULTILATERAL REGIME CONTROL 
LISTS.  THE DRAFT LAW WAS LIKELY TO BE ENACTED BY SUMMER 
¶2006.  leung ALSO UPDATED THE U.S. ON HONG KONG EFFORTS IN 
THE INDUSTRIAL OUTREACH ARENA WHICH CONTINUED TO PROMOTE 
INDIVIDUAL AWARENESS OF POSSIBLE EXPORT CONTROL VIOLATIONS 
VIA SEMINARS AND BRIEFINGS TO LOCAL BUSINESSES AND 
ORGANIZATIONS.  HE NOTED THE TID COULD ONLY INTERPRET ITS OWN 
LAWS AND STILL LACKED THE ABILITY TO INTERPRET U.S. LAWS 
AUTHORITATIVELY.  HE ALSO ADDED THAT THE USE OF A CUSTOMER 
LIAISON GROUP FEEDBACK MECHANISM PROVIDED DURING THE 
LICENSING PROCESS CONTINUES TO IMPROVE THE EXPORT CONTROL 
PROCESS. 
 
¶8. (C) IN THE AREA OF BILATERAL COOPERATION, leung NOTED THE 
EMPHASIS ON TRADING PARTNERS' ABILITY TO SHARE INFORMATION 
AND ENSURE that HONG KONG DOES NOT UNDERCUT CONTROL REGIMES 
OF OTHER COUNTRIES.  HE expressed APPRECIATION FOR A U.S. 
DEPARTMENT OF ENERGY FUNDED COMMODITY IDENTIFICATION WORKSHOP 
IN 2005.  regarding ADDITIONAL BILATERAL COOPERATION, 
TECHNICAL EXPERTS FROM OTHER COUNTRIES have WORKed FOR SHORT 
PERIODS OF TIME AT TID, INCLUDing from THE U.S., AUSTRALIA, 
JAPAN, AND THE UNITED KINGDOM.  AN EXPERT IN INDUSTRIAL 
OUTREACH WOULD BE SECONDED TO TID FROM JAPAN IN SUMMER 2006. 
BROAD PARTICIPATION BY HONG KONG IN SEVERAL INTERNATIONAL 
EVENTS were another indication of HONG KONG'S DESIRE TO 
CONTINUE TO MAINTAIN ITS HIGH STANDARD OF CONTROL COMPLIANCE. 
 
HONG KONG STRATEGIC CONTROL SYSTEM UPDATE 
 
¶9. (C) TID ASSISTANT DIRECTOR-GENERAL ERICA NG BRIEFED THE 
DELEGATION ON UPDATEs TO HONG KONG'S STRATEGIC CONTROL 
SYSTEM.  SHE NOTED UNDER THE "ONE COUNTRY TWO SYSTEMS" 
PRINCIPLE AND AS A SEPARATE CUSTOMS TERRITORY AND AUTONOMOUS 
TRADING ENTITY, HONG KONG CONTINUED TO COMPLY WITH HIGH 
INTERNATIONAL STANDARDS OF CONTROL ON STRATEGIC COMMODITIES. 
hong kong has a STRONG SELF-INTEREST in preserving ITS 
EXCELLENT REPUTATION.  ng REVIEWED HONG KONG'S FOUR PILLARS 
OF EXPORT CONTROL: LEGISLATION, LICENSING, ENFORCEMENT, AND 
INTERNATIONAL COOPERATION.  IN THE LEGISLATIVE AREA, HONG 
KONG CONTINUED TO MIRROR ITS CONTROL LISTS TO INTERNATIONAL 
CONTROL REGIMES WITH ANNUAL AMENDMENTS.  SHE UNDERSCORED HONG 
KONG'S COMMITMENT TO CONTROL LICENSING NOT ONLY ON EXPORTS, 
BUT ALSO IMPORTS, TRANSSHIPMENT, AND GOODS IN TRANSIT.  KEY 
COMPONENTS ALSO INCLUDED VERIFICATION OF "NO WMD END-USE" 
PURPOSES AND THE "NO-UNDERCUTTING PRINCIPLE," BY WHICH HONG 
KONG DOES NOT ALLOW A SHIPMENT THAT WOULD VIOLATE CONTROL 
SYSTEMS OF TRADING PARTNERS. 
 
HONG KONG 00002378  003 OF 005 
 
 
 
DAY TWO ) U.S. BRIEFING ON LICENSING AND REGULATORY ISSUES 
AND U.S./HONG KONG EXCHANGE ON LICENSING RELATED ISSUES 
 
¶10. (C) DIRECTOR FOR OFFICE OF NATIONAL SECURITY AND 
TECHNOLOGY TRANSFER CONTROLS BERNARD KRITZer presented on 
U.S. EXPORT LICENSING TRENDS, NEW DEVELOPMENTS IN 
MULTI-LATERAL EXPORT CONTROL REGIMES, PLANS FOR PROPOSED RULE 
CHANGES, AND POSSIBLE CHANGES IN TRADE ARRANGEMENT WITH 
CHINA.  KRITZER PROVIDED A BROAD OVERVIEW OF EXPORT LICENSING 
STATISTICS, INCLUDING REVIEW OF U.S. EXPORTS TO HONG KONG AND 
CHINA AND PROCESSING TIMES FOR LICENSING APPLICATIONS. 
PROCESSING TIMES FOR EXPORT LICENSE APPLICATIONS TO CHINA 
WERE DECREASING BECAUSE OF INCREASED EFFORTS BY BIS 
PERSONNEL, TRANSPARENCY WITH REGARDS TO APPLICATIONS 
INCLUDING ADDITIONAL DETAILS AND MORE END-USE VISITS. 
KRITZER ALSO DISCUSSED DETAILED APPROVAL AND DENIAL TRENDS IN 
LICENSING OVER THE PAST THREE YEARS.  ADDITIONAL STATISTICS 
INCLUDED TOP 10 LICENSED EXPORTS BY VALUE. 
 
¶11. (C) KRITZER BRIEFED ON EXPORT CONTROL REGIME 
DEVELOPMENTS, COVERING THE WASSENAAR ARRANGEMENT, AUSTRALIA 
GROUP, MISSILE TECHNOLOGY CONTROL REGIME, NUCLEAR SUPPLIERS 
GROUP, AND CHEMICAL WEAPONS CONVENTION, reviewing VARIOUS 
CHANGES TO EACH REGIME INCLUDING THE ADDITION OF NEW MEMBERS, 
POLICY HIGHLIGHTS, AND NEAR-TERM GOALS FOR EACH REGIME.  as 
for MAJOR CHANGES TO U.S. EXPORT CONTROL POLICY, kritzer 
HIGHLIGHTed AN UPCOMING PROPOSED RULE CHANGE IN MAY 2006 
RELATING TO THE WASSENAAR CONVENTION CATCH-ALL.  DDG LEUNG 
APPRECIATED AN OFFER BY KRITZER TO BRIEF THE HONG KONG 
ECONOMIC AND TRADE OFFICE IN WASHINGTON D.C. ONCE THE RULE IS 
PROPOSED.  DDG LEUNG STRESSED THE SCOPE AND COVERAGE OF THE 
RULE WOULD BE OF PARTICULAR INTEREST.  KRITZER described U.S. 
CHANGES IN ITS EXPORT CONTROL POLICY WITH INDIA.  FINALLY, 
KRITZER BRIEFED ON UPCOMING CHANGES TO DEEMED EXPORTS. 
 
EXCHANGE OF LICENSING DATA 
 
¶12. (C) DDG LEUNG PROVIDED A/S JACKSON WITH HONG KONG 
IMPORT/EXPORT DATA IN BOTH HARDCOPY AND ELECTRONIC FORMAT FOR 
THE LAST SIX MONTHS OF 2005.  FOLLOWING THE EXCHANGE, 
ASSISTANT DIRECTOR-GENERAL NG gave A GENERAL OVERVIEW Of 
LICENSING TRENDS IN 2005.  in conclusion, DDG LEUNG said TID 
WAS STRUGGLING WITH WHETHER HONG KONG SHOULD IMPLEMENT A 
CLASS LICENSE SYSTEM TO MOVE AWAY FROM THE CURRENT STRINGENT 
REQUIREMENTS FOR EACH ITEM TO BE LICENSED SEPARATELY.  he 
PLANNED TO PROCEED CAUTIOUSLY WITH ANY PLANS TO LIBERALIZE 
HONG KONG'S EXPORT CONTROL POLICY AND WELCOMED COMMENTS FROM 
A/S JACKSON.  A/S JACKSON NOTED THAT THE CURRENT SYSTEM WAS 
WORKING WELL, AND REITERATED THE U.S. WOULD BE AVAILABLE AT 
ANY TIME TO ASSIST TID WITH EXAMINING CHANGES TO ITS EXPORT 
CONTROL POLICY. 
 
¶13. (C) A/S JACKSON PROVIDED DDG LEUNG WITH U.S. EXPORT 
LICENSE APPLICATION AND WORLD-WIDE DENIAL DATA IN BOTH 
HARDCOPY AND ELECTRONIC FORMAT FOR 2005 AND THE FIRST QUARTER 
OF 2006.  A/S JACKSON NOTED SEVERAL ADDITIONS TO THE DATA, 
INCLUDING ADDRESSES OF CERTAIN HONG KONG BASED FIRMS FOR 
INVESTIGATIVE PURPOSES AND THE INCLUSION OF EXPORT CONTROL 
IDENTIFICATION NUMBERS.  IN RESPONSE TO A QUESTION FroM 
LEUNG, A/S JACKSON described HIS TESTIMONY to a congressional 
commission, IN WHICH HE HAD affirmed that HONG KONG CONTINUED 
TO HAVE A ROBUST AND TRANSPARENT EXPORT CONTROL SYSTEM.  a/s 
jackson did note that there are factions in washington, d.c. 
that are concerned about the security of exports to hong 
kong. 
 
DAY 3 ) ENFORCEMENT AND OUTREACH ACTIVITIES EXCHANGE 
 
¶14. (C) A/S JACKSON DISCUSSED RECENT TRENDS AND COOPERATIVE 
EFFORTS IN U.S. ENFORCEMENT OF EXPORT CONTROL LAWS AND 
REGULATIONS OVER THE PAST YEAR.  THE HIGH NUMBER OF LICENSING 
DATA EXCHANGES WAS HELPFUL AND THE U.S. CONTINUED TO SEEK 
ENHANCED COOPERATION WITH HONG KONG ON SPECIFIC CASES.  A/S 
JACKSON REITERATED HIS DESIRE TO INFORM POLICY MAKERS IN 
 
HONG KONG 00002378  004 OF 005 
 
 
WASHINGTON D.C. THAT HONG KONG CONTINUED TO HAVE A ROBUST AND 
TRANSPARENT EXPORT CONTROL SYSTEM THAT IS EFFECTIVE AND 
PROACTIVE.  HE ENCOURAGED TID TO CONTINUE TO PROVIDE LEADS TO 
THE ECO IN HONG KONG.  PROLIFERATION WAS CITED AS A WORLDWIDE 
PROBLEM WITH GREATEST CONCERN THAT WMD COMMODITIES COULD END 
UP IN AREAS OF CONCERN SUCH AS IRAN.  HE ALSO REITERATED THE 
IMPORTANCE ENFORCEMENT PLAYED AS ONE OF THE FOUR PILLARS OF 
HONG KONG,S EXPORT CONTROL SYSTEM. 
 
¶15. (C) ACTING ASSISTANT DIRECTOR FOR OPERATIONS JOHN 
SONDERMAN PROVIDED AN OVERVIEW OF BIS ENFORCEMENT TRENDS 
HIGHLIGHTING STATISTICS OF CRIMINAL CONVICTIONS, IMPOSITION 
OF FINES, ADMINISTRATIVE PENALTIES, AND CIVIL PENALTIES 
AGAINST U.S. FIRMS OVER THE PAST YEAR.  HE ALSO DISCUSSED 
BIS' CURRENT CASE INVENTORY OF 43 OPEN INVESTIGATIONS 
INVOLVING 35 TRANSSHIPMENTS AND 8 DIRECT SHIPMENTS TO HONG 
KONG.  HE ALSO PROVIDED IN-DEPTH DETAIL ON TWO CASES 
INVOLVING LITAMOS ELECTRONICs LIMITED AND SUNFORD TRADING 
LIMITED, BOTH OF WHICH WERE SUSPECTED OF SHIPPING POTENTIALLY 
CONTROLLED ITEMS TO AREAS OF CONCERN.  SONDERMAN RECOMMENDED 
A COORDINATED APPROACH ON BOTH CASES DETERMINE THE CONTROL 
STATUS OF THE ITEMS IN QUESTION, AND OFFERED TO SHARE DATA 
OBTAINED FROM U.S. COMPANIES.  THERE ARE PLANS TO name 
additional companies as related to sunford and subject them 
to the existing denial order against sunford.  SONDERMAN ALSO 
RAISED THE OUTSTANDING MUTUAL LEGAL ASSISTANCE AGREEMENT 
(MLAA) REQUEST RELATING TO SUNFORD TRADING LIMITED.  DDG 
LEUNG REPLIED THAT THE MLAA REQUEST WAS RECEIVED IN JULY 2005 
AND, ACCORDING TO HONG KONG LAW, NEEDED BEIJING'S CLEARANCE. 
the hkg HAD notified THE CENTRAL GOVERNMENT IMMEDIATELY. 
LEUNG ACKNOWLEDGED THE DELAY, BUT HONG KONG COULD NOT RESPOND 
UNTIL BEIJING INSTRUCTED IT TO DO SO.  HE ACKNOWLEDGED THE 
RECENT U.S. HONG KONG POLICY ACT REPORT ALSO MENTIONED THE 
MLAA REQUEST AND ADDED "SOME THINGS TAKE LONGER THAN OTHERS." 
 
 
¶16. (C) DDG LEUNG PROMISED that TID WOULD remain VIGOROUS IN 
ITS ENFORCEMENT EFFORTS.  he asked whether bis was sure that 
LITAMOS ELECTRONICs LIMITED was trading CONTROLLED EQUIPMENT. 
 LEUNG WANTED TO WORK CLOSELY WITH THE U.S. to ensure LITAMOS 
remained unaware that IT WAS BEING INVESTIGATED.  SONDERMAN 
replied that BIS was not sure whether litamos was trading 
controlled items since bis had not yet approached U.S. 
COMPANIES doing business WITH LITAMOS.  U.S. firms, however, 
WERE STILL NOT ALLOWED TO SHIP U.S. ORIGIN GOODS TO THE 
SUSPECTED IRANIAN END-USER.  DDG LEUNG OFFERED TO CONDUCT 
DISCREET CHECKS ON THE FIRM'S BACKGROUND AND IMPORT/EXPORT 
HISTORY IN AN EFFORT TO UNCOVER ITS PAST BUSINESS DEALINGS. 
BOTH SIDES AGREED TO WORK THROUGH THE U.S. CONSULATE'S ECO 
AND THROUGH THE ICE RepresentativeS AT THE CONSULATE. 
 
¶17. (C) according to DDG LEUNG, the HKG DID NOT HAVE THE 
LEGAL AUTHORITY TO LEVY ADMINISTRATIVE SANCTIONS, but Hong 
KOng prosecuted SUSPECT VIOLATIONS in the courts, maintaining 
A BALANCE OF POWERS BETWEEN THE JUDICIARY, EXECUTIVE, AND 
LEGISLATIVE.  CITING THE JUDICIARY,S NEED TO BE BETTER 
INFORMED ON EXPORT CONTROLS, TID HAS BRIEFED HONG KONG 
JUDGES.  IN THE OPERATIONAL AREA, LEUNG APPRECIATED BRIEFINGS 
AND DATA FROM THE U.S. AND OTHER TRADING PARTNERS ON EXPORT 
CONTROL.  LEUNG'S GOAL WAS TO MAKE HONG KONG'S EXPORT CONTROL 
SYSTEM ONE IN WHICH PROLIFERATORS OR ILLICIT TRADERS WILL 
VIEW AS TOO COSTLY OR RISKY TO CONDUCT ILLEGAL TRANSACTIONS. 
 
¶18. (C) A/S JACKSON PROVIDED THE FINAL BRIEF OF UPDATES ON 
END-USE CHECKS IN HONG KONG.  A/S JACKSON DISCUSSED THE 
RESULTS AND TRENDS FOR END USES CHECKS IN 2005 INCLUDING BOTH 
PRE-LICENSE CHECKS (PLC) AND POST-SHIPMENT VERIFICATIONS 
(PSV).  TWO FIRMS WERE RECENTLY ADDED TO THE UNVERIFIED LIST, 
PARRLAB AND TZH INTERNATIONAL.  WHILE DISCUSSING ISSUES 
OBSERVED DURING END-USE CHECKS, A/S JACKSON SAID THAT 
COMPANIES SHOULD BE AWARE OF THE END USER.  THE END USER MUST 
BE INCLUDED ON THE LICENSE, AND THE U.S. CONTROLLED COMMODITY 
SHOULD NOT BE SHIPPED TO AN HONG KONG ENTITY ITHOUT A 
PHYSICAL PRESENCE IN HONG KONG. 
 
 
HONG KONG 00002378  005 OF 005 
 
 
¶19. (C) DDG LEUNG WAS APPRECIATIVE OF PRIOR NOTIFICATION BY 
THE U.S. OF HONG KONG COMPANIES SUSPECTED OF EXPORT CONTROL 
VIOLATIONS.  THIS ADVANCE NOTICE REDUCED ELEMENTS OF 
SURPRISE.  DDG LEUNG WAS ALSO GRATEFUL FOR THE U.S. PROVISION 
OF DATA ON END USE CHECKS AND REAFFIRMED TID SUPPORT FOR BOTH 
PLC AND PSC CHECKS.  LEUNG REQUESTED ADDITIONAL INFORMATION 
ON PSV CHECKS THAT RESULTED IN THE DISCOVERY OF CONTROLLED 
COMMODITIES BEING SHIPPED TO HONG KONG SINCE THESE SHIPMENTS 
ALSO VIOLATE HONG KONG LAW.  DDG LEUNG ALSO INFORMED A/S 
JACKSON THAT THE HONG KONG GOVERNMENT WOULD SOON PROSECUTE 
THE MITRON CASE. 
 
CLOSING REMARKS 
 
¶20. (C) DDG LEUNG RECONFIRMED that THE "ONE COUNTRY TWO 
SYSTEMS" PRINCIPLE ALLOWED HONG KONG TO ENJOY AUTONOMY and 
MAINTAIN ITS OWN EXPORT CONTROL LAWS, CUSTOMS PROCEDURES, 
ENFORCEMENT, LICENSING, AND INTERNATIONAL COOPERATION 
INITIATIVES.  A/S JACKSON AND DELEGATION HAVE OBSERVED THIS 
PRINCIPLE FIRST-HAND.  LEUNG WISHED THAT "SKEPTICS" OF THIS 
SYSTEM IN WASHINGTON WOULD JUDGE HONG KONG NOT BY THEIR 
PRECONCEPTIONS BUT RATHER BY HONG KONG'S ACTIONS. 
INTERNATIONAL COOPERATION WOULD ALSO demonstrate to OTHER 
TRADING PARTNERS THAT A STRONG EXPORT CONTROL SYSTEM CAN 
INCREASE LEGITIMATE TRADE AND DECREASE ILLICIT TRADE. 
FINALLY, THE ANNUAL EXCHANGE CONTINUED TO BE THE BEST WAY FOR 
BOTH SIDES TO EXCHANGE DATA, DISCUSS CASES, AND MAINTAIN 
UPDATES ON EXPORT CONTROL REGIME CHANGES. 
 
¶21. (C) A/S JACKSON ACKNOWLEDGED HONG KONG'S EFFORTS IN 
ARRANGING A PRODUCTIVE SET OF MEETINGS AND WAS IMPRESSED WITH 
HONG KONG'S SERIOUSNESS IN SAFEGUARDING LEGITIMATE TRADE.  HE 
EXPRESSED U.S. SUPPORT FOR COOPERATION AND ASSISTANCE TO HONG 
KONG BY WORKING TOGETHER TO ENFORCE EXPORT CONTROLS INCLUDING 
PROVIDING LEADS, DATA SHARING, AND UPDATING PROGRESS ON CASES. 
 
¶22.  (U)  A/S JACKSON HAS CLEARED THIS CABLE. 
Cunningham