VZCZCXYZ0005
RR RUEHWEB

DE RUEHHK #2563/01 2780919
ZNR UUUUU ZZH
R 050919Z OCT 07
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 3120
RHMFIUU/HQ BICE INTEL WASHINGTON DC

UNCLAS HONG KONG 002563 
 
SIPDIS 
 
USDOC FOR 532/OEA/LHINES/DFARROW 
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT 
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: ARROW ASIA PACIFIC 
LTD WHSE 
 
REF: A) USDOC 06986 B) HK00909 
 
1.Unauthorized disclosure of the information provided below is 
prohibited by Section 12C of the Export Administration Act. 
 
¶2. As per reftel A request and at the direction of the Office of 
Enforcement Analysis (OEA) of the USDOC Bureau of Industry and 
Security (BIS), Export Control Officer Philip Ankel (ECO) conducted 
a post shipment-verification (PSV) at Arrow Asia Pacific Ltd., 20 
Floor, Tower Two, Ever Gain Plaza, 88 Container Port Road, Kwai 
Chung, Hong Kong (Arrow Asia).  The items in question are various 
electronic integrated circuits exported to Arrow on or about May 6, 
2007 and valued at USD 37,849.  On the applicable shippers export 
declaration (SED), these items are classified under export control 
classification number (ECCN) 3A001 and, if properly classified, 
would be controlled for national security (NS) reasons.  The 
exporter was Analog Devices of Norwood, Massachusetts. 
 
¶3.  A search of the web reveals that Arrow Asia is a business unit 
of Arrow Electronics, Inc, a New York Stock Exchange listed company 
with 2006 U.S. sales of USD 13.6 billion (www.arrow.com). Arrow 
Electronics, Inc. acts as supply channel partner for more than 600 
suppliers and 140,000 original equipment manufacturers, contract 
manufacturers and commercial customers.  In Asia, Arrow Asia 
operates fifty sales offices, four distribution centers and 12 local 
warehousing facilities in eleven countries/territories. 
 
¶4.  On September 11, 2007, ECO met with several representatives from 
Arrow Asia including Mr. Victor K.C. Cheung, Logistics Director, Mr. 
Albert W.H. Chan, Operation Controls Manager, Mr. Kam K.F. Leung, 
Transportation and Export Control Manager, and Ken T.K. Ng, Shipping 
Supervisor.  Representatives of Arrow Asia provided background on 
the company consistent with the information noted above and on the 
company's web site.  They stated that Arrow Asia has approximately 
1,600 employees in the region. 
 
¶5.  Mr. Leung also provided a detailed overview of the company's 
export control compliance system.  That system is based, in large 
part, on commercial software designed to compare customers and 
orders against established lists of parties of concern as well as 
reasons for control based on the country of destination and 
applicable ECCN.  Mr. Leung stated that the company's software 
screens all potential customers prior to opening a customer account 
and accepting orders.  Arrow Asia also obtains from all new 
customers an end-user certificate, which include a certification 
that the items will be used only for civil and not military or WMD 
applications and that they will not be re-exported or sold to third 
parties except in compliance with applicable export and re-export 
laws.  Only after these initial formalities are completed may a new 
client account be created.  When an order is received, the company's 
software checks the licensing requirements for the applicable ECCN 
and determines whether a license will be required for the shipment. 
A manual review by export control compliance staff must be completed 
for all transactions where a license requirement is noted by the 
software.  No sale may be completed absent release by export control 
personnel (typically after a license has been obtained).  Mr. Ng 
stated that Arrow Asia obtains a company registration certificate 
from all new customers to confirm corporate existence.  Mr. Ng 
further stated that the company screens both the registered address 
and the "ship to" address on all orders it receives against the 
applicable licensing requirements.  Mr. Leung demonstrated the 
system to the ECO at the conclusion of the meeting. 
 
¶6.  The conversation then turned to the particular transaction in 
question, namely a shipment apparently destined for Centre Bright 
(HK) Limited.  OEA provided ECO with an invoice from the exporter 
stating that one of multiple orders placed by Arrow Asia was 
destined for its customer, Centre Bright.  ECO showed the meeting 
participants the invoice and asked for further background on this 
transaction.  There was some confusion around the room at this point 
about what actually occurred with this order.  Mr. Leung eventually 
stated that he recalled that this order had originally been accepted 
but had subsequently been put on hold when it was determined that 
Centre Bright is on BIS's Unverified List.  This list is a 
compilation of companies where BIS has been unable to satisfactorily 
complete a PSV or pre-license check (PLC) for reasons outside of the 
control of the U.S. government.  The PSV of Centre Bright that 
prompted the inclusion of Centre Bright on the Unverified List is 
detailed in reftel B and occurred in 2005.  In that case, the ECO at 
that time stated that the transaction described by the Centre Bright 
representative had many suspicious characteristics including a 
customer without contact details (aside from a mainland China cell 
phone number) who preferred to pay for controlled commodities in 
cash.  In that case, the ECO recommended that Centre Bright be 
included on the Unverified List since significant portions of the 
purported transaction could not be verified.  Note: Inclusion on the 
Unverified List does not, by itself, impose any new licensing 
requirements.  However, such inclusion is considered to be a "red 
 
 
flag".  Where such red flags exist, parties have an affirmative 
obligation to inquire about the end-use, end-user and ultimate 
country of destination. 
 
¶7.  When the ECO inquired what happened next, Mr. Ng stated that 
Centre Bright cancelled its order. Shortly thereafter, Arrow Asia 
received an order for an identical number (668) of the same items 
from another company, namely Victory Wave Holdings.  Mr. Ng provided 
copies of the applicable transaction documents and corporate 
registration documents for Victory Wave Holdings Limited.  The 
packet includes the Arrow Asia standard End-User Statement signed by 
Hong Chun Tai on behalf of Victory Wave Holdings.  The packet also 
included an invoice showing sale of the 668 items and listing ECCN 
3A001(a)(5)(a)(3).  This subcategory of ECCN most likely does not 
require a license to Hong Kong but would most likely require a 
license to mainland China.  The packet also included the applicable 
import license issued by Hong Kong TID for the items stating that 
the goods are for local (Hong Kong) consumption. 
 
¶8.  ECO requested more information on how it transpired that the 
transaction with Victory Wave Holdings was completed when an 
identical Centre Bright order for 668 Analog Devices AD6645ASW-105 
integrated circuits had recently been cancelled.  Mr. Cheung stated 
that he would investigate the matter further and provide more 
background on how the transaction occurred once he had obtained such 
information.  He suggested that any judgments about the nature of 
the transaction be deferred until further information could be 
obtained. ECO will provide OEA additional information when he 
obtains it from Arrow Asia. 
 
¶9.  A subsequent review of the Hong Kong Companies Registry 
information revealed that Victory Wave Holdings Limited is related 
to Centre Bright.  The review also revealed that several additional 
Hong Kong companies are also related to both Victory Wave Holdings 
Limited and/or Centre Bright. These relationships are detailed 
below. 
 
¶10.  Victory Wave Holdings Limited:  This company was established in 
February 2007 and has limited paid-up share capital (the Hong Kong 
equivalent of USD 1,000).  Its Director is listed as Hong Kong 
resident Wong, Yung Fai.  Its registered address is listed as Unit 
2401A, 24Fl, Park-In Comm Ctr, 56 Dundas St, Mongkok, Hong Kong. 
The signatory for Victory Wave Holdings Limited on the Arrow Asia 
End-User Statement is listed as Hong Chun Tai.  Corporate records 
obtained when the Centre Bright PSV was completed show Wong Wai 
Chung and Hong Chun Tai as the sole shareholders of Centre Bright. 
In short, one of the shareholders of Centre Bright (Hong Chun Tai) 
apparently signed the Victory Wave Holdings Limited End-User 
Statement. 
 
¶11.  Exodus Microelectronics Company Limited:  This company was 
established in March 2003.  Its registered address is Unit 6B, Block 
1, International Centre, 2-8 Kwei Tei Street, Shatin, Hong Kong.  It 
likewise has nominal share capital (the Hong Kong equivalent of USD 
1,000).  Its directors are listed as Hong Kong residents Hong, Chun 
Tai and Wong, Yung Fai.  In short, one of this company's directors 
(Hong, Chun Tai) is also a director in Centre Bright and the 
signatory for Victory Wave Holdings Limited.  Another of its 
directors (Wong, Yung Fai) is also a director of Victory Wave 
Holdings Limited. 
 
¶12.  Echelon Microsystems Limited:  This company was established on 
April 25, 2007.  Its registered address is Unit 2006, 10F Carnarvon 
Plaza, 20 Carnarvon Rd., Hong Kong.  It has the Hong Kong equivalent 
of USD 1000 authorized share capital but no paid-up share capital. 
Its director is listed as Wong, Yung Fai. In short, this company 
shares a director with Victory Wave Holdings Limited, Exodus 
Microelectronics Company Limited and Omniway Technology Limited 
(referenced below). 
 
¶13.  Omniway Technology Limited:  This company was also established 
on April 25, 2007 (on the same day as Echelon Microsystems Limited). 
 Its registered address is Unit 503, 5/FL Silvercord Tower 2, 30 
Canton Rd., Hong Kong.  It has the Hong Kong equivalent of USD 1000 
authorized share capital but no paid-up share capital.  Its director 
is listed as Wong, Yung Fai.  In short, this company shares a 
director with Victory Wave Holdings Limited, Exodus Microelectronics 
Company Limited and Echelon Microsystems Limited. 
 
¶14.  SBC International (Success Business Center): This company 
advertises itself as a leading company register agency in Hong Kong 
and mainland China.  It has 18 offices in Hong Kong and mainland 
China with over 400 professional staff to provide business advice 
and business registration services.  More information is available 
at www.sbc.com.hk/English.  The addresses of Victory Wave Holdings 
Limited, Echelon Microsystems Limited and Omniway Technology Limited 
 
 
correspond to SBC International branch offices in Hong Kong. 
 
¶15.  Other companies:  A review of Hong Kong Companies Registry 
information reveals additional companies that are related to Centre 
Bright.  In particular, Centre Bright director and shareholder Wong, 
Wai Chung, was also a director in Square Holdings Limited, a company 
that was dissolved in 2004.  Co-directors in that company were also 
directors in the following additional companies (that are still 
listed as operational) in Hong Kong:  Bescom Development Limited 
(established in 1993), Beijing Technology Limited, China Urban 
Transport Engineering and Consulting Limited, Pacific Telecom 
Development Limited, Radio Frequency Engineering Limited, Boland 
(H.K.) Limited and Goahead World Limited. 
 
¶16.  The ECO suspects that at least some of the companies affiliated 
with Centre Bright and Victory Wave Holdings Limited have been 
established as conduits for Centre Bright purchases (Centre Bright 
is still operational and maintains a web site at 
www.centrebright.com).  ECO further suspects that several of these 
companies have received exports of items from the United States and 
recommends that OEA review those exports to determine what further 
action is warranted in respect of those shipments and companies. 
ECO also recommends that OEA review exports listing the addresses of 
these companies as ship-to addresses.  The ECO also recommends that 
BIS conduct a commodity classification to confirm the ECCN and 
licensing requirements of the items that are the subject of this 
check. 
 
¶17.  The ECO recommends that this check be classified as 
Unfavorable.  That recommendation is based on the apparent 
circumvention of Arrow's compliance software hold on transactions 
with Centre Bright and the eventual sale of the items to Victory 
Wave Holdings, a company affiliated with Centre Bright.