VZCZCXYZ0007
RR RUEHWEB

DE RUEHHK #0966/01 1490915
ZNR UUUUU ZZH
R 280915Z MAY 08
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 4967
RHMFIUU/HQ BICE WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 2246

UNCLAS HONG KONG 000966 
 
USDOC FOR 532/OEA/LHINES/ADYSON 
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR WILLIAM ZARIT 
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS 
BEIJING FOR FCS ECO JEANNETTE CHU 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: PRE-LICENSE CHECK: FREE COMPONENTS 
 
REF: A) USDOC 02727 (2008) B) D395732 C) HK00843 (2008) D) HK 03094 
(2007) E) HK 00001 (2008) F) HK02563 (2007) (G) HK 01953 (2005) H) 
HK 00909 (2006) 
 
¶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 combination pre-license check (PLC) and Post Shipment Verification 
(PSV) of Free Components Co. Ltd., Unit 7401A/26 F, DMK-IN 
Commercial Centre, Fo Dundai St., Mong Kok, Hong Kong (Free 
Components).  The items in question for the PLC are 350 SRAM memory 
arrays valued at USD 16,000 and which are that subject of BIS 
license application D395732.  Additionally, the PSV concerns four 
shipments of Actel A42MX36-1CQ208B integrated circuits that were 
ordered by Free Components from Singapore company Tecnomic 
Processors Pte. Ltd. and that are the discussed in further detail in 
reftel C.  All of the items are classified under Export Control 
Classification Number (ECCN) 3A001 and are controlled for national 
security (NS) reasons.  Austin Semiconductor, Inc. of Austin, Texas 
is the license applicant for the PLC and Tecnomic was the reexporter 
in relation to the four additional PSV related shipments. 
 
¶3.  A review of the Hong Kong Companies Registry reveals that Free 
Components has been in existence since July 2006.  Its paid-up share 
capital is the Hong Kong equivalent of USD 12. Its sole director is 
listed as mainland Chinese national Hu, Yanhui, resident of Yin 
Chuan City, Ningxia and mainland identification card holder with 
number 640102198501091515.  Its sole shareholder is listed as 
mainland national Chen, Yanjie of Shenzhen, mainland China.  The 
registered address of Free Components, namely 2401A Park-In 
Commercial Center, 56 Dundas Street, Hong Kong, is located at the 
offices of SBC International (a company secretarial service). As 
detailed further below, Free Components is affiliated with a range 
of additional companies in Hong Kong and mainland China, many of 
which are claim to be active in trading various military grade 
integrated circuits and other military grade components. 
 
¶4.  According to the web site of Free Components 
(www.freeicforum.com), the company is one of the major stocking 
distributors of electronic components in China.  The web site 
further states that Free Components is expanding its focus on 
hard-to-find and obsolete military, industrial or commercial grade 
components.  The company states it also has several offices in China 
including in Shenzhen, Beijing, Xian, Chengdu and Cixi besides its 
Hong Kong office. 
 
¶5.  A review of the Free Components web site reveals that it is not 
located at the address provided in reftel A but rather at 2401A 
Park-In Commercial Center, 56 Dundas Street, Mongkok (the registered 
address noted above).  A Ms. Chan agreed to meet at a different 
address, namely Room 503, Grand City Plaza, 1 Sai Lau Kok Road, Hong 
Kong.  A review of the PSV related purchase orders obtained from 
Tecnomic reveal an additional address in the Grand City Plaza, 
namely Room 1702. 
 
¶6.  On May 21, 2008, ECO and Commercial Assistant Carrie Chan 
visited the company and met with Ms. Chan.  She had no business 
cards to share with the ECO and stated that she was merely a clerk. 
The office is located in a quiet office building.  There is no 
reference to Free Components on the building directory or on the 
door of the office.  It is a one-room office with a desk, phone and 
a stack of boxes against one wall.  Ms. Chan appears to work alone 
in the office although a sign apparently used when Ms. Chan is out 
of the office (and laying on a table in the room) tells visitors to 
visit room 1702 if room 503 is vacant. 
 
¶7.  Ms. Chan stated that her office acts as the receiving point for 
shipments received from abroad.  Upon receipt of packages, she 
informs her principals in Shenzhen that the packages have arrived. 
The Shenzhen office is responsible for receiving orders and payments 
and sourcing products.  When payment is received from customers, the 
Shenzhen office informs the customer and that customer typically 
arrives at the offices of Free Components to pick up the items (over 
ninety percent of all packages are handled in this way).  In other 
cases, Free Components delivers the items to the customer, typically 
by courier.  Ms. Chan claimed ignorance of customer names and 
end-uses of the items Free Components receives.  She stated that the 
Park-In Commercial Center address is the registered address of the 
company. 
 
¶8.  When asked about the specific transactions and the order in 
question, Ms. Chan stated that neither she nor her superiors knew 
anything about the order to Austin Semiconductor and had no further 
information to provide on that issue.  As to the shipments from 
 
 
 
Tecnomic, Ms. Chan stated that she only had one document relating to 
the final disposition of those items.  That document (a copy of a 
simple invoice) lists Feson Technology Limited as the buyer of two 
of the Actel ICs.  No address is given on the document for this 
company and it appears that the company picked up the items from 
Free Components.  Ms. Chan had no further information to provide on 
this company other than her belief that it is located in mainland 
China.  No such company with that name could be found in the Hong 
Kong Companies Registry.  As to the remaining shipments from 
Tecnomic, Ms. Chan stated that all documents for those shipments had 
been sent back to Shenzhen and that she had been unable to obtain 
those from Shenzhen.  She went on to say that the files are 
typically kept in a warehouse and then are unavailable.  This is 
purportedly to keep sales agents from leaving the company with 
customer names and contact details.  ECO did not find her answers on 
this point to be credible.  No additional information on the final 
disposition of these shipments was forthcoming. 
 
¶9.  The conversation then turned to a range of Hong Kong and 
mainland Chinese companies that appear to be related to Free 
Components and which are themselves engaged in trading in 
electronics components.  As noted below, many of those companies 
claim to trade in military grade electronic components and some show 
images of warships, fighter jets and missiles on their web sites.  A 
listing of the companies follows as well as a short explanation of 
their relationship to Free Components and to each other. 
 
¶10.  Sur-Link Technology (H.K.) Limited (Sur-Link HK):  A review of 
the Hong Kong Companies Registry reveals that Sur-Link HK has been 
in existence since 2003.  It has paid-up share capital is the Hong 
Kong equivalent of USD 1200. Its sole director is listed as mainland 
Chinese national Chen, Renyi with mainland Chinese passport number 
G05120674.  Chen, Renyi is also a director in Italy Fegour Electric 
(International) Holdings Limited with Cen, Gengqiang who holds 
mainland Chinese passport number G11990438.  Sur-Link HK's 
registered address and actual premises are located in the same 
building as Free Components (the Grand City Plaza Address) but on 
the 17th floor.  Invoices relating to the PSV shipments list the 
17th floor office of Sur-Link as the offices of Free Components.  A 
review of Sur-Link's web site (www.surelink-ic.com) reveals that 
this company's China affiliate office is located at the same address 
in Shenzhen as Free Components (No. 4019 Shennanzhong Rd., Shenzhen 
- an office building developed by China Aerospace Science and 
Industry Group (CASIC)). It also states that Sur-Link HK is 
expanding internationally including into Iran.  Ms. Chan confirmed 
during the meeting that Sur-Link HK and other companies noted herein 
are owned by a common group of owners.  Additionally, she stated 
that she had heard that Sur-Link has an office in Dubai.  By 
subsequent phone call the next day, Ms. Chan stated that the 
companies were not related.  ECO notes that U.S. Company QP 
Semiconductor (www.qpsemi.com) lists Sur-Link HK as its authorized 
distributor/representative.  According to QP Semiconductor's web 
site, it is a fabless semiconductor firm serving the military, 
aerospace and high reliability industries. 
 
¶11.  CTC International (Hong Kong) Limited (CTC HK):  A review of 
the Hong Kong Companies Registry reveals that CTC HK has been in 
existence since 2003.  Its paid-up share capital is the Hong Kong 
equivalent of USD 250,000. Its directors are listed as mainland 
Chinese national Cen, Chongping (also listed as Cen, Chong Ping) 
with mainland passport number G03363416 and Hong Kong resident Chan, 
Lee Na with Hong Kong identity card number K155636(3).  The 
directors are also the company's shareholders.  Cen, Chongping is 
also the director of H.K. Xing Hang Yuan Int'l Company Limited 
(discussed below).  According to this company's web site, 
(www.ctc-ic.com), the company is also able to source military grade 
ICs from Intersil, IVG, Avago, Maxim, AD and others.  It claims a 
Hong Kong and Shenzhen office.  The Shenzhen office is located at 
the same address as the Shenzhen offices of Sur-Link and Free 
Components. Ms. Chan confirmed during the meeting that CTC HK and 
other companies noted herein are owned by a common group of owners. 
By subsequent phone call the next day, Ms. Chan stated that the 
companies were not related. 
 
¶12.  H.K. Xing Hang Yuan Int'l Company Limited (HK XHY):  A review 
of the Hong Kong Companies Registry reveals that HK XHY has been in 
existence since 2000.  Its paid-up share capital is the Hong Kong 
equivalent of USD 1,200. Its directors and shareholders are listed 
as mainland Chinese national Cen, Chong Ping with mainland passport 
number G03363416 (also a director in CTC HK) and mainland Chinese 
national Chen, Yan Jie with mainland passport number G22619671. 
Various web searches for this company linked back to the Free 
Components web site.  On other web sites, the company claims to be a 
 
 
 
supplier of military products for use in aviations, weapons and 
shipping.  Ms. Chan confirmed during the meeting that HK XHY and 
other companies noted herein are owned by a common group of owners. 
By subsequent phone call the next day, Ms. Chan stated that the 
companies were not related.  Some of the invoices from the Tecnomics 
order list Free Components as the bill-to address while listing HK 
XHY as the ship-to address.  HK XHY was the subject of a previous 
unfavorable PSV discussed in reftel G (01953) and corresponding 
administrative enforcement action against the Taiwanese reexporter 
involved in that case. 
 
¶13.  Other internet searches revealed an apparent link between Free 
Components, CTC HK, HK XHY and Sur-link (and their mainland 
counterparts) and a series of companies described in reftel D, 
namely Hongtu Hangyan Electronic (HK) Co. and Ziheng International 
Electronics Co. as well as affiliated companies in Shenzhen 
including Shenzhen Hongtu Hangyang Technology Co. Ltd., Shenzhen 
Xinghangyang Technology Co., Ltd., Shenzhen Star-Navi Technology Co. 
and Beijing Hongtu Mingli Technology Trading Co. Ltd. The Shenzhen 
addresses of these companies are located in the same building as 
those of the companies listed above (Free Components, CTC HK, XHY HK 
and Sure-Link HK) but on a different floor.  Web research suggests 
that Shenzhen Star-Navi is actually the holding company for 
companies in the Hongtu Hangyang group.  When asked about some of 
these companies, Ms. Chan stated that she had heard of Ziheng but 
had not done business with it. She stated that she had shipped 
product to Hongtu Hangyang Technology Co. Ltd. although she was 
unfamiliar with Beijing Hongtu Mingli. She stated that Shenzhen 
Star-Navi Technology Co. was actually another English language name 
for Xing Hang Yuan (referenced in the immediately preceding 
paragraph). 
 
¶14.  ECO further notes that the registered address of Free 
Components (in the Park-In Commercial Center) is located at the 
offices of SBC International (a company secretarial service). That 
address is also the registered address of Victory Wave Holdings, the 
subject of previous unfavorable PSVs referenced in reftels E and F 
and likewise involving suspected diversion of national security 
controlled items to mainland China.  In Reftel E, the representative 
of Victory Wave stated that the particular items referenced in that 
check (EAR99 items) were destined to Shenzhen Hongdu Industry Co. 
(referenced above and apparently related to Free Components and the 
other companies noted herein).  Other companies related to Victory 
Wave (and referenced in reftel E including Exodus Microelectronics 
Company Limited, Echelon Microsystems Limited and Omniway Technology 
Limited) have been registered by SBC International in Hong Kong as 
have Sur-Link HK, Italy Fegour (referenced in paragraph 10 above), 
CTC HK, XHY HK, and Free Components.  As noted in reftel F, Victory 
Wave is related to another Hong Kong company, namely Centre Bright 
which was placed on the BIS Unverified List in light of its 
problematic business practices (that PSV is detailed in reftel H). 
 
 
¶15.  An initial review of Shippers Export Declarations (SEDs) 
listing the address of Free Components and CTC HK (both in the Grand 
City Plaza office building) reveals substantial shipments of 
electronic components to the Grand City Plaza addresses noted above 
(associated with Free Components and others) as well as additional 
companies and individuals that have received shipments, namely Able 
Components Co. Ltd., Ms. Cristy Chou and ARI International Co. Ltd. 
Able Components is not listed in the Hong Kong Companies Registry. 
ARI International Co. Ltd. is a new company registered in February 
¶2008.  It has no paid up share capital.  Its sole director and 
shareholder is mainland national Zhou, Lujun.  Its registered 
address is also at SBC International, 2401A Park-In Commercial 
Center, 56 Dundas Street, Hong Kong (as with Victory Wave, Free 
Components and others).  An additional two companies, located on the 
7th floor of the Grand City Plaza office building, are also in 
receipt of various electronics related components.  They are Maxlink 
Industries Ltd. and Seatech International. 
 
¶16.  Recommendations:  ECO recommends that OEA conduct a thorough 
review of all shipments to the various Hong Kong companies (and 
related addresses) listed herein to determine whether controlled 
commodities have been shipped to these companies as it is highly 
likely that those commodities have been transshipped to mainland 
China.  Also, ECO recommends that BIS consider conducting outreach 
visits at exporters (including, especially, QP Semiconductor) that 
have shipped items to these companies, particularly those that list 
both a commercial and military production capability. (ECO note: 
Subject to some limited exceptions, most commercial items that are 
not controlled for export to China may be sold to virtually all 
end-users in China). ECO further recommends that OEA consider a 
 
 
 
review of shipments of controlled commodities to all of the Hong 
Kong addresses of SBC International as ECO suspects that additional 
procurement entities may be using SBC addresses as their business 
premises (www.sbc.com.hk).  Additionally, ECO recommends that BIS 
consider placing Free Components, CTC HK, Sur-Link HK, XHY HK, Able 
Components Co. Ltd. and ARI International Company Limited on the 
Unverified List (this is in addition to earlier recommendations that 
other companies related to these companies be added to the 
Unverified List). Finally, ECO recommends that BIS prepare commodity 
classifications for the items involved in this PSV so that ECO may 
approach the Hong Kong government to appraise it of potential 
violations of HK law related to likely failure by the companies in 
question to obtain required Hong Kong licenses. 
 
Cunningham