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OO RUEHGH
DE RUEHIN #0078/01 0110949
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O 110949Z JAN 07
FM AIT TAIPEI
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S E C R E T SECTION 01 OF 02 TAIPEI 000078 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/TC, ISN/CB AND ISN/MTR 
 
E.O. 12958: DECL: 01/11/2027 
TAGS: CN CW ETTC KNNP PARM TW
SUBJECT: CROSS-STRAIT TRADE IN RESTRICTED CHEMICALS 
 
REF: A. TAIPEI 72 
     ¶B. MIKULAK-NEELY EMAIL OF 1/9/2006 
     ¶C. 06 TAIPEI 66 
     ¶D. 05 STATE 3573 
 
Classified By: AIT Deputy Director Robert Wang, 1.4 B/C 
 
¶1.  (S) Summary: During the January 8 meeting reported ref A, 
the Taiwan Bureau of Foreign Trade (BOFT) Export Control Task 
Force Head Wally Su (Shi-hwa) also provided AIT Econ with 
details and documents related to Taiwan's ongoing trade with 
the PRC in Chemical Weapons Convention (CWC)-restricted 
schedule 2 and schedule 3 chemicals.  End summary. 
 
Taiwan Imports Both Schedule 3 and 2 Chemicals from China 
--------------------------------------------- ----- 
 
¶2.  (S) BOFT's Su provided AIT with copies of end-user 
certificates issued by BOFT and with Taiwan Customs documents 
showing CWC-restricted chemicals imported from China.  The 
Taiwan Customs documents showed five different types of 
schedule 2 and four different types of schedule 3 chemicals 
had been imported from China into Taiwan within the past 
couple years.  Su explained that BOFT is the only agency that 
issues end-user certificates. 
 
State-owned Companies Export Restricted Chemicals to Taiwan 
--------------------------------------------- --- 
 
¶3.  (S) The end-user certificate Su provided to AIT was for a 
Taiwan company to import 10,000 kg of phosphorous oxychloride 
from Sinochem International Corporation in Shanghai, China. 
BOFT had issued the certificate on November 28, 2006.  Su 
said that BOFT investigates the importing company before 
issuing an end-user certificate by searching its own database 
for information on the company.  BOFT then contacts the 
Industrial Development Bureau (IDB) in the Ministry of 
Economic Affairs to verify that the import is an appropriate 
chemical for the company to import.  Su added that sometimes 
the IDB will contact one of the chemical trade associations 
(Taiwan Chemical Industry Association, TCIA, or Taiwan 
Specialty Chemical Association, TSCA) for a written 
confirmation that the requested import is appropriate.  Su 
said Taiwan Customs will not/not allow CWC-restricted 
chemicals into Taiwan without an end-user certificate issued 
by BOFT, but left inspection of the export license up to the 
exporting country's officials.  In addition to China, Taiwan 
imports schedule 3 chemicals from the United States, 
Malaysia, India, and Japan. 
 
¶4.  (S) Note: The written confirmation sometimes provided by 
the chemical trade associations may be the document that PRC 
CWC officials are referring to in ref B.  End note. 
 
Taiwan Also Exports Restricted Chemicals to China 
---------------------------------- 
 
¶5.  (S) BOFT's Wally Su said that BOFT also grants export 
licenses for schedule 3 chemicals to be exported to China, 
Hong Kong, Singapore, Thailand, and other destinations. 
According to BOFT, Taiwan does not produce any schedule 2 
chemicals.  He cited the penalties imposed on BOC Lien Hwa 
for re-exporting restricted chemicals to China as an example 
of Taiwan's effective control of these exports (reported ref 
C). 
 
U.S. Interests Involved 
------------------ 
 
¶6.  (S) Comment:  China's efforts to block Taiwan's 
international trade in CWC-restricted chemicals has resulted 
in China becoming Taiwan's major trading partner in these 
restricted chemicals, at least according to official Taiwan 
trade statistics.  This partly explains why the TCIA and its 
PRC counterpart, the China Petroleum and Chemical Industry 
 
TAIPEI 00000078  002 OF 002 
 
 
Association (CPCIA) have held annual meetings for the past 
several years, with the venue alternating between Taiwan and 
mainland China (ref B), even though the CPCIA continues to 
block TCIA participation in the International Council of 
Chemical Associations. 
 
¶7.  (S) Although PRC officials are willing to allow exports 
(referred to as "internal transfers" by the PRC) of schedule 
3 and schedule 2 chemicals to Taiwan, they do not require an 
end-user certificate from BOFT, and do not have an ability to 
inspect, regulate, or check the bona fides of the importing 
company.  This inability to inspect or monitor highlights 
ongoing concerns about Taiwan's possible biological/chemical 
weapons programs, plans to develop satellite space launch 
capability, and expressed interest in building retaliatory 
measures to deter a PRC attack.  The PRC also apparently 
lacks any mechanism to verify the exports actually enter 
Taiwan and are not being transshipped to terrorist entities. 
 
¶8.  (S) The current situation also leaves some of Taiwan's 
most advanced industries (specialty glass, fire-resistant 
fabrics, semiconductors, LCD monitors, etc.) increasingly 
dependent on China for supplies of chemicals critical in the 
manufacturing process.  This brings increased PRC control 
over Taiwan's high-tech economy that can be used to speed the 
migration of these industries to China or to disrupt the 
supply of these high-tech produsts to global markets. 
 
¶9.  (S) Given the current absence of any outside monitoring 
of chemicals in Taiwan, AIT believes it would be in U.S. 
interests to urge Taiwan to accept U.S. inspection and 
monitoring of its production, use, and trade in 
CWC-restricted chemicals, just as it now accepts 
post-shipment, end-user license, blue lantern and other 
inspections and verifications.  In return, the U.S. could 
offer to make available to Taiwan industry the restricted 
chemicals needed in legitimate manufacturing.  Following our 
current practice with non-U.S. origin nuclear reactor 
components, we could consider non-U.S. origin chemicals to be 
covered under the same inspection and monitoring 
arrangements. 
 
¶10.  (S) AIT believes that one possible extra-CWC framework 
for such an inspection and monitoring arrangement would be 
the Export Control Gameplan developed by ISN/MTR in August 
2005 (ref D).  This program, in which Australia, Germany, 
Japan, and the UK also participate, was designed to provide 
training and other resources to help Taiwan strengthen its 
control over imports, exports, transits and transshipments of 
sensitive commodities.  End comment. 
YOUNG