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FM AMEMBASSY BEIJING
TO RUCPDOC/USDOC WASHDC
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHGH/AMCONSUL SHANGHAI 5864
RUEHC/SECSTATE WASHDC 7613
RHEHNSC/NSC WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 020070 
 
SIPDIS 
 
SIPDIS 
 
USDOC FOR 532/BIS/OEA/TANDRUKONIS/LLAUCIUS 
USDOC FOR 532/BIS/OEE/JSONDERMAN/MOBRIEN 
USDOC FOR OIO/ADESSARAN 
STATE FOR EB/ESP 
STATE FOR EAP/CM 
SHANGHAI FOR FCS 
NSC/PROSTRAT 
US DEPARTMENT OF HOMELAND SECURITY FOR IMMIGRATION AND 
CUSTOMS ENFORCEMENT 
 
E.O. 12958: N/A 
TAGS: BEXP CH ETRD ETTC PREL
SUBJECT: PRE-LICENSE CHECK D355915 ZHEJIANG HESHENG 
CHEMICAL CO. LTD 
 
REF: USDOC 3976 (07/10/06) 
 
BEIJING 00020070  001.2 OF 002 
 
 
Unauthorised disclosure of the information provided below is 
prohibited by Section 12(c) of the Export Administration Act. 
 
¶1. REFTEL requested a Pre-License Check end-use visit to 
determine the reliability of ZHEJIANG HESHENG 
CHEMICAL CO. LTD (a/k/a HE SHENG CHEMICAL) to receive 
controlled United States goods and technology. 
BIS license application D355915 lists ZHEJIANG HE SHENG 
CHEMICAL CO. LTD as the potential ultimate 
consignee of four heat exchangers that will be used to strip 
methyl chloride from a silicone process. 
These items are valued at $972,500, classified as ECCN 2B350 
and controlled for chemical and biological 
warfare reasons. CARBON OF AMERICA, 540 Branch Drive, Salem, 
Virginia 24153 (540-389-7535) submitted 
this export license application. 
 
¶2. On August 8, 2006, ECO requested that the Department of 
Mechanical-Electrical and High Technology 
Industries of the Ministry of Commerce (MOFCOM) arrange a 
pre-license visit to ZHEJIANG HE SHENG 
CHEMICAL CO. LTD in accordance with the Exchange of Letters 
on End-Use Visit Understanding. On August 
24, 2006, MOFCOM scheduled this visit for August 31, 2006. 
 
¶3. On August 31, 2006, ECO, accompanied by MOFCOM official 
ZHOU Quan; TAO Fei, Vice Division Chief, 
Division of mechanical and Electronic Products I/E of the 
Foreign Trade and Economic Cooperation 
Bureau of Zhejiang Province; and LU Jian Liang, Vice Division 
Chief, Foreign Trade and Economic 
Cooperation Bureau of the Jiaxing Municipal Government, 
conducted a site visit at the plant premises 
of ZHEJIANG HE SHENG CHEMICAL CO. LTD, Wai Huan Xi Lu (Outer 
Ring West Road), Jia Pu Economic Development 
Zone, Jia Xing Town, Zhejiang Province, China, and met with 
ZHOU Jun, General Manager; LI Wei, and other 
employees of the company.  BAI Ju, Sales Coordinator, 
SHANGHAI ANGELINT CHEMICAL TECHNOLOGY CO. LTD 
also attended this meeting. 
 
¶4. ZHEJIANG HE SHENG CHEMICAL CO. LTD also maintains a 
business office approximately three kilometres 
away at the Old Customs Building, 2/F, Ya Shan West Road, Jia 
Pu Exonomic Development Zone, Jia Xing 
Town, Zhejiang Province, China. 
 
¶5. According to company literature and information provided 
by Mr. ZHOU, HE SHENG CHEMICALS was formed 
in August 2005 through a joint investment between NINGBO CIXI 
TIAN YI INVESTMENT CO. LTD (70%) and 
HONG KONG OU BO INVESTMENT COMPANY (30%), and began with 
registration capital of 135 million RMB. 
NINGBO CIXI TIAN YI COMPANY is part of the NINGBO HESHENG 
GROUP, which includes NINGBO HESHENG HATS 
CO LTD, CIXI ZHENGDE  CO LTD, NINGBO SHIMAZU HESHENG CO LTD, 
NINGBO LUO NING SILICONE MANUFACTURING 
CO LTD., HANGZHOU XINXIN REAL ESTATE DEVELOPMENT CO LTD, 
HANGZHOU JIMEI REAL ESTATE DEVELOPMENT CO 
LTD AND NINGBO HESHENG MAGNETS CO LTD. The NINGBO HESHENG 
GROUP is headquartered in Chang He Town, 
Cixi City, Zhejiang Province, and was founded in August 1998. 
 The Chairman of the Board of NINGBO 
HESHENG GROUP is LUO Liguo and the General Manager is LUO 
Liwei. 
 
¶6. According to Mr. ZHOU, NINGBO LUO NING SILICONE 
MANUFACTURING CO LTD uses silicone to make 
silicone rubber for applications in consumer electronics and 
other products including wristbands 
as popularised by major sports and entertainment figures, 
e.g., Lance Armstrong's yellow "Live 
Strong" wristbands.  (NOTE: The website for NINGBO LUO NING 
SILICONE MANUFACTURING CO LTD is 
www.in-silicons.com)  NINGBO LUO NING SILICONE MANUFACTURING 
CO LTD needed a reliable supplier 
 
BEIJING 00020070  002.2 OF 002 
 
 
of raw materials so the parent company, TIANYI INVESTMENT CO, 
formed HE SHENG CHEMICAL. HE SHENG 
CHEMICAL's only other prospective customer is GENERAL 
ELECTRIC, specifically GE-TOSHIBA JIANGSU 
NANTONG SILICONE MANUFACTURING FACTORY; however, a firm 
contract has not een signed nor has an 
order for product actualy been placed. Other possible 
customers include:  ZHEJIANG JIANGSHAN 
FUSHITE CHEMICAL CO LTD, HANGZHOU JICHIDA ORGANIC SILICON CO 
LTD, SHENZHEN TIAN DING FINE CHEMICAL 
CO LTD, DONG GUANG NAN TAI INSULATION MATERIAL CO LTD, WUJIN 
HUA YU, HANGZHOU DALU CO LTD FINE 
CHEMICAL FACTORY, PINGHU UNITED CHEMICAL CO LTD, SHAOXING 
ZHEN TIAN CHEMICAL CO LTD, and HANGZHOU 
TRANSFER CHEMICAL CO LTD. 
 
¶7. Mr. ZHOU stated that HE SHENG CHEMICAL will specialise in 
the following product areas: silicone 
oil, silicone resin, and silicone rubber. The factory is 
currently under construction and he is 
awaiting equipment, including the heat exchangers sought in 
this export license application, in 
order to complete construction. Mr. ZHOU expects to start 
operations in November 2006 with actual 
production commencing in January 2007. Mr. ZHOU anticipates 
annual output of approximately 4000 
tons of room temperature and high temperature silicone 
rubber. HE SHENG CHEMICAL currently has 
200 employees and Mr. ZHOU plans to hire up to 600 employees. 
Mr. ZHOU stated that all of the 
managerial staff have backgrounds in chemical engineering. 
 
¶8. ECO toured the construction site with Mr. ZHOU and 
observed the area where the heat exchangers 
will be installed. The actual factory is being constructed by 
the THIRD CHEMICAL CONSTRUCTION 
COMPANY, which was selected through an open bidding process. 
HE SHENG CHEMICAL occupies a 400 "mu" 
lot and is building in two phases, with Phase 1 on 160 "mu". 
Additional construction will be 
considered after the completion of Phase I, and a 
construction company selected through another 
open bid. 
 
¶9. RECOMMENDATION - FAVOURABLE. ECO notes that para. 13 of 
REFTEL (USDOC 3976) states "Interagency 
PLC request on commodities controlled for CBW reasons... 
There are also issues regarding the 
purchaser that should be resolved." It is unclear what issues 
require further resolution, and 
efforts to clarify this and interagency concerns were 
unsuccessful. Research by ECO did not 
uncover any ties to parties of proliferation or law 
enforcement concern. ECO found Mr. ZHOU 
and other company officials to be cooperative and forthcoming 
during the site visit, Mr. ZHOU 
also provided ECO with photographs of the HE SHENG CHEMICAL 
facility under construction, which 
can be made available to interested parties through direct 
request to ECO. Based upon the 
limited information provided in REFTEL and the information 
developed during the PLC, ECO 
recommends this company as a likely to be a responsible 
recipient of U.S. controlled items and 
technology. 
 
RANDT 
 
RANDT