VZCZCXYZ0004
PP RUEHWEB

DE RUEHIN #1975/01 2410313
ZNR UUUUU ZZH
P 290313Z AUG 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 6568
INFO RUEAIIA/CIA WASHDC
RUCPDOC/USDOC WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RHMCSUU/FBI WASHINGTON DC
RUEPINS/HQ BICE INTEL WASHINGTON DC

UNCLAS AIT TAIPEI 001975 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/TC, ISN/MTR, AND PM/DTCC FOR BLUE LANTERN COORDINATOR 
MICHAEL ROMERO, AIT/W 
 
E.O. 12958:  N/A 
TAGS: ETTC KOMC TW
SUBJECT:  TAIWAN: RESULTS OF BLUE LANTERN PRE-LICENSE CHECK ON 
APPLICATIONS 050054652 AND 050055297, AND POST-SHIPMENT CHECK ON 
APPLICATION 050037854 
 
REF: A. 2007 STATE 105206 
 ¶B. 2007 AIT TAIPEI 1041 
 ¶C. 2006 AIT TAIPEI 3583 
 
 
¶1. (SBU) Per reftel A. request, AIT/T visited the foreign consignee, 
Dong Chin Co., and contacted the end user, ROC Taiwan Navy - Naval 
Magong Logistics Support Command Penghu Shipyard. Based on the site 
visit and the information collected by AIT/T, transactions related 
to pre-license check request appear to be legitimate.  The contract 
related to application number 050055297 has been cancelled by the 
Taiwan Navy, however, due to lack of delivery by Dong Chin.  AIT/T 
confirmed receipt of the item subject to the post-shipment check by 
the Taiwan Navy.  AIT/T also confirmed the bona fides of Lieutenant 
Commander Liang, Tao-hung 
 
Liang, Tao-Hung 
 
¶2. (SBU) AIT/T confirmed the bona fides of Liang, Tao-Hung, Lt. 
Commander, Procurement Office, Taiwan R.O.C. Navy, Naval Magong 
Logistics Support Command in Peng Hu. 
 
Taiwan Navy 
 
¶3. (SBU) AIT/T contacted Mr. Liang.  Mr. Liang stated that Dong Chin 
is a long-standing contractor with the Taiwan Navy.  Mr. Liang 
verified the contract numbers, items, and the end-uses of the items 
as stated in the two pre-license checks requests (DTC number 
050054652 for alarm switchboards, and DTC number 050055297 for VRC 
antennas). 
 
Dong Chin: 
 
¶4. (SBU) On August 17, 2007, AIT/T officer visited Dong Chin in its 
Kaohsiung City office located on No 665, Jio-Ru 2nd Rd., San Min 
District, Kaohsiung City.  The company has another office located at 
No. 7, Lane 15, Ling Shen Rd., Magong City, Peng Hu, as indicated on 
the license application.  Peng Hu is also the place of registration 
for Dong Chin.  Dong Chin representatives stated the Taiwan Navy in 
Peng Hu is its sole customer. 
 
¶5. (SBU) AIT/T reviewed Dong Chin's contract with the Taiwan Navy 
for the alarm switch board, Taiwan Navy's end-use statement, and 
Dong Chin's purchase order with the U.S. supplier.  The contract 
number, commodity, and quantity matched on all documents. 
 
¶6. (SBU) AIT/T reviewed Dong Chin's contract with the Taiwan Navy 
for the antenna, Taiwan Navy's end-use statement, and Dong Chin's 
purchase order with the U.S. supplier.  The contract number, 
commodity, and quantity matched on all documents.  However, Dong 
Chin officials stated that the due to Dong Chin's inability to 
deliver this item within the contract time frame, the Taiwan Navy 
cancelled this particular purchase order for AS-1729/VRC Antenna 
(DTC License number 050055297.)  AIT/T confirmed the cancellation of 
the order with the Taiwan Navy. 
 
¶7. (SBU) Dong Chin officials explained the storage and handling 
procedure for items Dong Chin imports.  First, items arrive in Dong 
Chin's Kaohsiung office and are directly delivered to the Taiwan 
Navy storage facility in Peng Hu for inspection; after the items are 
inspected and accepted by the Taiwan Navy, they are then shipped to 
the specific Taiwan Navy end-user warehouse for installation.  AIT/T 
confirmed this handling process with the Taiwan Navy. 
 
¶8. (SBU) For the post-shipment check on license 050037854, Dong Chin 
officials stated that the subject inverter was delivered to the 
Taiwan Navy in April 2007.  Dong Chin officials said it does not 
keep copies of delivery receipts when goods are delivered to the 
Taiwan Navy.  AIT/T confirmed delivery of the inverter with the 
Taiwan Navy and its use, and also confirmed with Navy officials that 
companies that supply items for the Navy normally do not take 
receipts of delivery when items are delivered directly to the Navy. 
AIT/T obtained from the Taiwan Navy and reviewed the delivery note, 
inspection report, and test results for the inverter.  All 
information reconciled. 
 
¶9. (SBU) Dong Chin was established in Peng Hu in 2002 to take 
advantage of a business investment tax incentive offered by the 
county government.  When it was first established, its primary 
business was distribution of such items as general machinery, 
electrical tools, precision instruments, painting materials, and 
fire fighting equipment.  In 2006, Dong Chin added import and 
government contract as business lines.  Dong Chin officials stated 
 
 
that one of the reasons for adding government contract and import as 
business lines was because its previous import request through 
Likung failed.  When asked if the U.S. supplier explained why the 
previous license application was denied, Dong Chin officials stated 
that the U.S. supplier did not provide an explanation. 
 
¶10. (SBU) When asked to explain its relationship with Likung, Dong 
Chin officials stated that Likung is a separate company with same 
ownership as Dong Chin.  Likung's primary business line is import. 
Likung is registered and located at No 665, Jio-Ru 2nd Rd., San Min 
District, Kaohsiung City. 
 
¶11. (SBU) The company officials stated that two other companies, 
Dong Yi and Tai Chuan also have the same ownership as Dong Chin and 
Likung.  Dong Yi and Tai Chuan are contractors with the Taiwan Navy. 
 All are owned by the Lu family and are co-located in Kaoshiung. 
 
¶12. (SBU) AIT/T met with the following principals of the companies: 
 
-Mr. Lu, Yo-Tsuen, the father 
-Mr. Lu, Dong Ming, the brother 
-Mrs. Lu, Yeh Yu, the mother 
 
In addition to the family members who are also principals in the 
businesses, the family has one full-time employee in its Kaoshiung 
office.  Mr. Lu, Dong Ming, splits his time between the Peng Hu and 
Kaoshiung offices. 
 
Lastly, Ms. Lu, Jia-Ling Rebecca, the daughter, who resides in Ohio, 
United States, acts as a liaison between the companies and U.S. 
suppliers. 
 
¶14. (SBU) Dong Chin officials stated that they are aware of 
restrictions on USML items, especially prohibitions against 
unauthorized re-transfers and re-exports of such items. 
 
REF B. 07 State 1041 
 
¶15. (SBU) AIT/T reached Mr. Liang Tao-Hung through the phone number 
on the license application.  AIT/T confirmed bona fides of Mr. Liang 
directly with the Taiwan Navy.  The first time AIT/T called the 
number, we experienced the same result; i.e., an older sounding 
female who stated that there is no Mr. Liang.  AIT/T called again 
and asked for Mr. Liang using a slightly different way of 
pronouncing his name.  This time, AIT/T was able to contact Mr. 
Liang.  Also, AIT/T found out that the number on the license 
application is a general number on Taiwan Navy's website to call for 
information to bid on government contracts.  AIT/T obtained a main 
switchboard number and Mr. Liang's cell number both of which worked 
as proper contact numbers for Mr. Liang. 
 
REF C. 06 State 3583 
 
¶16. (SBU) Based on information from AIT/T contacts and the site 
visit, we believe Likung and Tung Yi (also Romanized as Dong Yi) 
have the same ownership but have different roles in transactions; 
Tung Yi bids on contracts with the Taiwan Navy, and Likung imports 
the goods.  It appears that when Mr. Liang of Taiwan Navy was 
contacted, he may not have known of the bifurcation of duties by the 
companies nor the relationship because he was new at his job. 
(Note: This bifurcation of responsibilities is common practice among 
small businesses in Taiwan. End note.)  AIT/T obtained a copy of 
Tung Yi (or Dong Yi) company registration with the Peng Hu County 
government.  Tung Yi however does not appear on BOFT website because 
that website lists importers and exporters only.  However, this new 
information does not clarify the discrepancy on the quantity and 
timing of the order by the Taiwan Navy noted in Reftel C. 
 
 
YOUNG