VZCZCXYZ0008
RR RUEHWEB

DE RUEHIN #0630 1470858
ZNR UUUUU ZZH
R 270858Z MAY 09
FM AIT TAIPEI
TO SECSTATE WASHDC 1652

UNCLAS AIT TAIPEI 000630 
 
SIPDIS 
 
STATE FOR EAP/TC, PM/DTCC AND ISN/MTR 
 
PM/DTCC FOR BLUE LANTERN COORDINATOR TIM MAZZARELLI 
 
E.O. 12958: N/A 
TAGS: ETTC KOMC TW
SUBJECT: TAIWAN: RESULTS OF BLUE LANTERN PRE-LICENSE 050169368 
 
REF: STATE 48504 
 
¶1. Summary:  Based on information obtained from the Ministry of 
National Defense and site visit to the consignee, EZO Corporation 
(EZO), it appears that EZO is a reliable recipient of USML items. 
End summary. 
 
Ministry of National Defense 
---------------------------- 
¶2. Lieutenant Colonel Wang from the 202 Arsenal Military of National 
Defense confirmed the order of subject items: one advanced weapon 
boresight system and one compact field tester.  Wang also stated 
that the importer of the commodities is EZO. 
 
EZO Corporation 
--------------- 
¶3. On May 20, AIT met with Daniel Chang, Manager, and Sophia Chang, 
Vice President, of EZO.  EZO is a trading company/importer owned by 
the brother-sister team. 
 
¶4.  EZO is a family-owned company with about eight (8) employees. 
It had up to 25 employees last year but the economic downturn forced 
the company to trim its payroll.  The company started in 1985 under 
the name of Grancosmos.  In 2002, it merged with Union Systems, Inc. 
and operated under the name of Union Systems.  (Union Systems was 
established in 1998 by the Changs.)  In 2003, Union Systems changed 
its name to EZO.  AIT reviewed corporate registration documents and 
confirmed the above facts. 
 
¶5.  EZO's main business is to import infrared cameras and related 
testing equipment for military, hospital, electronics, steel and 
petrochemical clients. 
 
¶6.  The Changs stated that EZO has had several end-use visits 
related to imports of dual-use items from the United States.  This 
is the first AIT visit related to imports of munitions items.  The 
Changs stated that they imported munitions items from the U.S. when 
they operated their business under the names Grandcosmos and Union 
Systems.  AIT received a State Department license issued in 1997 for 
export of one set of MilCAM-MV with 100 mm lens from Inframetrics 
for use by 402 Arsenal, Ministry of National Defense. 
 
¶7.  With respect to imports of subject items, AIT reviewed the 
contract between 202 Arsenal, Military of National Defense, and 
Innova Technology and Management (Innova) for the procurement of the 
subject items.  The Changs explained that, due to Taiwan procurement 
and tax rules, Innova bids on government contracts but EZO does the 
buying and importing of the items.  Innova also opens letters of 
credit with the foreign seller, when required to do so by the 
seller.  AIT reviewed email correspondence between EZO and CI 
Systems, Inc. (the U.S. seller) explaining the letter of credit 
process.  In the emails, Innova is referred to as a "sister company" 
of EZO.  In fact, the two companies are not legally related; rather, 
the Changs have a minority stake in  Innova, and the majority owners 
in  Innova have a minority interest in EZO.  The Changs explained 
that neither party interferes in each others' operations; that they 
are "silent partners" for financial support purposes. 
 
¶8.  The Changs explained that EZO does not warehouse any imported 
item.  The company delivers the items directly to its clients.  For 
military items, a military representative, Daniel Chang, and an 
"auditor" unpack the shipment together, verify the content, take 
pictures of the items, and then assemble the items, if necessary. 
 
¶9.  While the risk of diversion by EZO is minimal, AIT notes that 
the record-keeping by the Changs and their ability to recall facts 
related to company history and past experience in dual-use and 
munitions licensing was lacking.  AIT advised that they do a better 
job in keeping thorough records and institute a system that would 
make it easier to find records.  AIT informed the Changs that all 
parties to a transaction, including the government contractor and 
importer, if they are different, need to be noted on a license 
application.  They said they would do a better job in relaying all 
information to U.S. exporters. 
 
¶10.  The Changs stated that, because they have had experience in 
importing both dual-use and munitions items, they are very familiar 
with the restrictions on reselling, transferring, or re-exporting 
U.S. controlled items. 
 
YOUNG