VZCZCXYZ0004
RR RUEHWEB

DE RUEHHK #0379/01 0620208
ZNR UUUUU ZZH
R 030208Z MAR 09
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC
INFO RUEHC/SECSTATE WASHDC 6998
RHMFIUU/HQ BICE WASHINGTON DC

UNCLAS HONG KONG 000379 
 
USDOC FOR 532/OEA/LHINES/ADYSON 
USDOC FOR 3132 FOR FCS/OIO REGIONAL DIRECTOR PATRICK SANTILLO 
BICE FOR OFFICE OF STRATEGIC INVESTIGATIONS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: BMGT BEXP HK ETRD ETTC
SUBJECT: EXTRANCHECK: POST SHIPMENT VERIFICATION: EDAL ELECTRONICS 
CO LTD 
 
REF: A) USDOC 07199 
 
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 Edal Electronics Co. Ltd., No. 
17, Wang Chiu Road 6/F, Continental Industrial Building, Hong Kong 
(Edal). The items in question for this PSV are various 
microprocessors exported to Edal on or about April 3, 2008.  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.  Based on documentation provided by the 
exporter, it appears that these items are of the class that may be 
exported license free to Hong Kong, but would require a license for 
export or reexport to mainland China because of their ability to 
function at extreme temperatures. The exporter was Rochester 
Electronics LLC of Newburyport, Massachusetts. 
 
¶3.  According to the Hong Kong Companies Registry, Edal has been in 
existence since 1988.  Its paid up share capital is the Hong Kong 
equivalent of USD 12,500.  The Hong Kong Companies Registry lists 
four Hong Kong residents as directors, namely Chan, Tak Chung Terry 
(HK ID G238949(4)), Chan, Tak Wah (HK ID E198464(4)), Chan, Tak Wing 
(HK ID E750017(7)) and Tam, Moureen (HK ID G503096(9)).  Chan, Tak 
Wah is also a director of Edal Investment Limited in Hong Kong. 
 
¶4.  A review of the Edal's web site (www.edal.com.hk) reveals that 
Edal specializes in the distribution of electronic components.  It 
has offices in Shenzhen and Xian, China.  Related company, Telestar 
Electronics Ltd. is located in the same building as Edal but uses 
the same phone number contact as Edal (more on Telestar below). 
 
¶5.  It took some time to arrange a meeting with Edal to discuss the 
transaction.  It appears that the initial person involved in the 
transaction had already left the company as had a second person 
initially tasked to respond to the inquiry.  Eventually, on January 
14, 2009, ECO visited Edal and met with Jean Yun, Senior Sales 
Executive.  She stated that Edal is an electronic components 
distributor that sources such products for further reexport to 
mainland China and other countries.  According to Ms. Yun, the end 
products for such components are televisions, video players and 
other similar electronics products.  She stated that Edal is also a 
distributor for such companies as NXP, Philips and Infineon . 
 
¶6.  Ms. Yun further stated that Edal is a distributor for Rochester 
Electronics which focuses on discontinued and obsolete products. 
According to Ms. Yun, customers for Rochester products are in the 
oil equipment repair and telecommunications business areas.  When 
asked about Telestar, Ms. Yun stated that this company is related to 
Edal (one family owns an interest in both companies).  Telestar is 
engaged in a similar line of business as Edal.  Ms. Yun was unable 
to clarify the full relationship between the two companies nor was 
she able to clarify the underlying reason for two very similar 
companies to be in apparent direct competition. 
 
¶7.  Ms. Yun stated that Edal typically forwards order details to 
Rochester and, if no license is required, Rochester fulfills the 
order by shipping the goods to Edal.  However, she noted that is a 
license is required (in instances where the item is destined to the 
mainland, for example), Edal often cancels the order because it is 
difficult to get a license and Edal typically loses this order as a 
result.  Ms. Yun further stated that Rochester is aware of the final 
destination of products based on end user statements that Edal and 
Rochester require customers to complete for certain orders.  In this 
instance, the Rochester end use document states that the end user is 
a company in Taiwan, namely Tai Chung Electronics.  ECO has been 
unable to find any trace of this company, whether in Hong Kong or 
Taiwan. 
 
¶8.  On February 8, 2009, ECO and Commercial Assistant Carrie Chan 
visited the purported Hong Kong customer, G&L Co.  This company is a 
sole proprietorship and trading company that has been in existence 
since 1997.  The company headquarters consist of a one room office 
in an older, out of the way, shopping center.  Mr. Ku, Oi Wang and 
his wife jointly run the business.  According to Mr. Ku, they are a 
general trading company that has been in existence for some time. 
ECO notes that the company has no web presence.  Mr. Ku stated that 
the company deals in a range of products.  Its customers come to it 
by word of mouth. 
 
¶9.  As to the specific transaction in question, Mr. Ku stated that 
he is no longer able to reach the customer at the numbers provided 
to him.  He further stated that no purchase order was received from 
the company.  Rather, G&L generated a sales order based on a verbal 
 
 
order from the customer.  Mr. Ku stated that for products where 
there might be customs issues (later he clarified that this referred 
to electronic components) G&L will not export the items but requires 
that the buyer pick them up from his location or that they designate 
a Hong Kong address for pickup. From the face of the documents and 
from the conversation with Mr. Ku, it would seem that Mr. Ku 
purchased roughly USD 15,000 of nonrefundable electronic components 
from Edal on behalf of a buyer that he knew virtually nothing about. 
 Mr. Ku stated that he had done a previous order and, as a result, 
he was prepared to take the risk.  ECO did not find Mr. Ku's answers 
to be credible and believes that Mr. Ku simply does not wish to 
disclose his mainland China buyer. 
 
¶10.  It appears to ECO that Edal was, in this instance, prepared to 
sell controlled electronic components to a Hong Kong trading company 
based on limited information about the customer and final end-use. 
ECO believes it is also quite likely that G&L is aware of the final 
destination of the items (that being, most likely, mainland China). 
In fact, G&L's business model is likely to source controlled items 
for mainland companies that are unwilling to order items directly in 
situations where a license may be required.  Based on the 
information noted above, ECO recommends a close review of past 
shipments to Edal and G&L as well as Telestar.  ECO recommends 
further outreach to Rochester Electronics to ascertain its knowledge 
of this transaction and to encourage it to police its distributors 
more closely.  ECO notes that Rochester shipments have been the 
subject of multiple unfavorable end use checks implicating similar 
products and similar procurement tactics.