VZCZCXYZ0001
PP RUEHWEB

DE RUEHIN #2106/01 2560557
ZNR UUUUU ZZH
P 130557Z SEP 07
FM AIT TAIPEI
TO RHMFIUU/USCBP WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 6787
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
INFO RHMFISS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS AIT TAIPEI 002106 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR ISN/ECC - YWONG, ACHURCH AND KCROUCH 
DEPT FOR EAP - SBREMNER 
CBP/INA FOR RWATT AND JGOUGE 
DEPT FOR ENERGY/NNSA FOR T. PERRY AND S. JONES 
 
E.O. 12958: N/A 
TAGS: ETTC MNUC PARM PREL KSTC KNNP TW
SUBJECT: EXBS: TAIWAN MONTHLY REPORTING CABLE - AUGUST 2007 
 
¶I.  BROAD ITEMS OF INTEREST TO ADVISORS AND AGENCY 
MANAGERS: 
 
(SBU) During the week of September 17, the EXBS Advisor will be in 
Washington, D.C. for export control discussions. 
 
II. COMPLETED ACTIONS FOR THE REPORTING PERIOD. 
 
¶A.  SITE ASSESSMENTS AND MEETINGS DURING REPORTING PERIOD: 
 
(SBU) During the weeks of August 13 and 27, the EXBS Advisor 
accompanied Bureau of Foreign Trade (BOFT) officials of the Taiwan 
Ministry of Economic Affairs in Taiwan's outreach visits to select 
Taiwan companies.  The EXBS Advisor's participation focused on 
internal export control systems, if any, of the companies.  As a 
general matter, while company officials we met with were aware of 
export controls, the companies did not have systematic internal 
control checks for exports.  A summary, derived from presentations 
by the companies and answers to questions posed by AIT and BOFT 
officials, for each company follows: 
 
Precision International Corporation - Precision was established in 
¶1981.  It became a publicly traded company in 2006.  It has a branch 
office in Kaohsiung, Taiwan, and eleven offices in China. 
Precision's main business lines include testing and analyzing 
instruments, professional training and consulting, and technical and 
calibration services.  Precision expects its 2007 revenue to be 19 
million NTD (approximately 576,000 USD).  45% by value of its client 
base is manufacturing, 25% schools and research institutions, 20% 
government, 5% wholesale and distributors, and 5% other.  It imports 
certain items used in production; 70% imported from Europe, 20% from 
the United States, and 10% from Japan.  About 5% of imported items 
are regime-controlled.   All imported items are for its own use - 
Precision does not re-export or transfer imported items. 
 
DuPont Taiwan Limited - DuPont Taiwan is the Taiwan operation of 
DuPont USA.  It distributes DuPont's full chemical and material 
product line.  It imports DuPont chemicals and other products, and 
exports Riston, Ryralux, Kapton, fungicide, titanium oxide, and 
electronic inputs.  DuPont's sales force is trained on export 
controls by a local company official with materials provided by 
headquarters.  All export control policy and guidance is provided by 
headquarters.  Company officials raised issues related to stricter 
controls placed on exports of DuPont items to Taiwan as compared to 
Japan and South Korea.  They stated that stricter controls put 
DuPont Taiwan at a competitive disadvantage with companies in Japan 
and Korea and with Taiwan companies that import from Japan and 
Korea. 
 
Yuan Sheng Aluminum Manufacturing Corp. - Yuan Sheng was established 
in 1983 and produces and exports aluminum and aluminum alloy items. 
The primary customer base for the company is bicycle, automotive 
cooling system, architectural materials, and sports equipment 
manufacturers.  The company is on Taiwan's "watchlist" for 
unlicensed exports to certain entities in Iran.  Most of the 
discussions centered on the company's exports to Iran. 
 
Taiyo Nippon Sanso Taiwan, Inc. - This company is the Taiwan 
operation of Taiyo Nippon Sanso, a Japanese firm.  Taiyo Nippon is a 
distributor of gas within Taiwan.  Its primary clients are 
semiconductor, basic metal, and precision instrument manufacturers. 
The company imports gas, some of them regime-controlled, such as 
arsine and phosphine, for direct sale to its Taiwan clients.  It 
does not export any of the imported items.  Since it is not an 
exporting company, it does not have an export control system in 
place; rather, it provides the necessary information and documents 
to the foreign exporter should any of the items it imports requires 
an export license. During the discussion, the company officials 
stated that most of its products are imported from Japan and some 
from the United States.  The officials also pointed out that U.S. 
exports of arsine and phosphine require licenses to Taiwan but not 
to Japan and South Korea, thus making it burdensome for Taiwan 
companies to import these items from the United States. 
 
Formosa Epitaxy Inc. - Formosa was established in 1999.  The company 
primarily manufactures light-emitting diodes and LED wafers and 
chips.  The company's largest client share is domestic sales but it 
also exports to China, South Korea, and the United States.  While 
the company imports certain export-controlled items from the United 
States for its production work, the items it exports are not 
regime-controlled. 
 
Praxair Chemax Semiconductor Materials Company Ltd. - Praxair Chemax 
was established in 1999 and is the Taiwan operation of Praxair, 
Inc., a U.S. firm.  Praxair Chemax is a distributor of high-pressure 
gas, some of it regime- controlled.  Its customers include Arima and 
Huga Optotech Inc.  (This company's business line is very similar to 
Taiyo Nippon Sanso.)  Praxair Chemax imports gas, including arsine 
and phosphine, from its parent in the United States.  Praxair Chemax 
is the largest arsine and phosphine distributor in Taiwan.  Praxair 
Chemax provides the necessary information and documentation to its 
parent for the parent to obtain export licenses.  Praxair delivers 
orders directly to its customers in Taiwan and does not export. 
Praxair Chemax relies on its parent for all export control related 
policies and guidance.  As with Taiyo Nippon Sanso, Praxair Chemax 
raised concerns about license requirements for arsine and phosphine 
for exports to Taiwan, but not to Japan and South Korea. 
Huga Optotech Inc. - Huga is a publicly traded company that was 
established in 1998.  Huga manufactures and sells light-emitting 
diodes and LED wafers and chips.  (This company's product line and 
customer base is similar to Formosa Epitaxy.) The company sells in 
Taiwan as well as exports to Asia and the United States.  It imports 
certain controlled items from the United States, Germany and the 
United Kingdom.   For the imported items, it provides the requested 
information and documents to foreign exporters.  The company pointed 
out that the processing time for export licenses from Germany and 
the United Kingdom is about two weeks while the processing time for 
the United States is two months. 
 
She Hong - She Hong was established in 1965.  It has over 400 
employees and 25 overseas branch offices including 10 offices in 
China.  It makes machining centers under the brand name Hartford. 
It makes about 2,000 machine tools per year, or about 146 per month. 
 It has been experiencing approximately 25% annual growth per year 
since 2003; its target is 10 billion NTD (approximately 303 million 
USD) in annual revenue by 2010.  It has 17.30% of the machine tool 
market share in Taiwan, and 20.42% of its business is accounted for 
by exports. About 5% of its machine tools are controlled at the 
regime level.  About 0.01 or 0.02 % of its exports are to Iran.  It 
is the 485th company in Taiwan in terms of revenue.  Its primary 
customer base is automotive (70%), semiconductor, oil drilling, and 
consumer goods. She Hong sources machine tools to make Hartford 
products from Japan and Germany.  The company stopped making 5-axis 
machines in 2006 due to export control requirements by Japan and 
Germany.  Since receiving warning about its exports to Iran in 2006 
from BOFT, the company no longer exports to Iran.  However, the 
company receives about two or three email inquiries a month on sales 
to Iran which are then rejected.  The company also does not provide 
service or parts on previous exports to Iran. 
 
Euma-Spinner - Euma was established in 1995 as a joint venture with 
Spinner, a German firm.  Euma is an original equipment manufacturer 
for Spinner.  Eighty percent of Euma's exports are to Spinner.  The 
second-biggest export client is its sales office in Nanjing, China. 
Euma sources all of its machining parts from Germany.  It has no 
sales to North Korea or Iran.  (The company pointed out that the 
Middle-East market falls under Spinner, not Euma.)  The primary 
client base for the company is automotive and consumer goods 
manufacturers. 
 
Dah Lih - Hah Lih was established in 1960.  It has 300 employees. 
Its gross revenue in 2006 was 60 million NTD (approximately 1.8 
million USD).  Its monthly manufacturing capacity is about 70 
machine centers and 5 milling machines.  Its domestic sales are 30% 
of its production and exports are 70%.  Of overseas sales, the 
biggest share goes to China.  The company makes 70% of the 
components it needs to make machine tools.  The machine tools it 
uses to make its own parts are imported from Japan, Germany and 
Switzerland.  It sources CNC from Fanuc of Japan.  The company 
provides a customer list to Fanuc on a monthly basis.  The company 
does not export to North Korea or Iran.  The company did export to 
North Korea in the past, but due to BOFT's denial of licenses, it no 
longer sells to North Korea.  The company officials stated that its 
inability to sell to North Korea has had a huge impact on the 
company.  In the past, it had sold 3-axis machines used to 
manufacture consumer goods to North Korea. 
 
¶B. BLUE LANTERN CHECKS: 
 
(SBU) On August 17 and 24, 2007, the EXBS Advisor visited two Taiwan 
companies in Taipei County and one in Kaohsiung, respectively, 
pursuant to Blue Lantern requests.  The results of the visits were 
reported to the Directorate of Defense Trade Controls (DDTC). 
 
¶C. TRAINING CONDUCTED DURING REPORTING PERIOD: 
 
(U) The End-User/End-Use training by the Department of Energy took 
place on August 20 - 21, 2007.  Forty representatives from various 
Taiwan ministries and offices attended the training.  In addition, 
representatives of the Japan, South Korea, Canada, and Germany 
offices in Taiwan attended the first day of the program. 
 
III. UPCOMING TRAINING: 
 
(U) The transit/transshipment training, implemented by the 
Department of State through contractors, is being planned for the 
week of October 29, 2007, in Taipei. 
 
(U) The Targeting and Risk Management training, implemented by 
Customs and Border Protection, is being planned for the week of 
November 12, 2007, in Kaohsiung. 
(U) Taiwan is planning a one-day industry outreach program with 
Germany on October 5, 2007.  Another one with Japan is planned for 
the end of the current calendar year or early next year.  These 
programs are geared toward German and Japanese companies operating 
in Taiwan and Taiwan companies importing strategic items from 
Germany and Japan.  The EXBS Advisor plans to attend both events. 
 
 
IV. UPCOMING MEETINGS 
 
(U) On September 12, 2007, the EXBS Advisor and an officer from the 
Economic Section will meet with Bureau of Investigations (MJIB) 
officials of the Taiwan Ministry of Justice to discuss MJIB's 
investigations of export control violations.  MJIB has been very 
active in export control prosecutions of companies and individuals 
according to Taiwan officials and press reports. 
 
¶V. RED FLAG ISSUES: 
 
None. 
 
POC for this report is Mi-Yong Kim, EXBS Advisor. 
Telephone +886 2 2162 2347. 
 
YOUNG