One customer wanted specialised glass-to-metal pin seals, which are used in vacuum components, sensor and transducer housings, harsh environment feedthroughs and battery headers.

The other customer was looking for circular hermetic connectors, which are designed to facilitate the flow of electrical current across two devices.

Chen never made it home.

As small as these devices are they are considered sensitive technologies - used commercially, but with military and nuclear applications as well.

The United States restricts their export - especially to Iran - which just happened to be where Chen's diminutive cargo was destined.

The glass-to-metal seals requested by the Iranian customer were made of a specific nickel alloy, Alloy 52, which is commonly used in semiconductor applications. Chen's customer wanted the pin seals for a custom engineered terminal assembly. The high-performance assembly would be suitable for aerospace, thermal imaging devices, chemical agent monitors and weapons systems.

The circular hermetic connectors that Chen's second Iranian customer ordered were designed to military specifications and have aerospace, defence, industrial and petrochemical applications.

The tale of how Chen ended up in Guam raises questions about Hong Kong's role in the trade in sensitive technologies and China's ambiguous stance on this issue.

As more countries around the world have begun cracking down on Iran's efforts to obtain technologies for its nuclear and military programmes, Hong Kong has become an increasingly attractive re-export hub for Iran to evade sanctions.

Chen had experienced his fair share of problems and it was almost six months after he received the order from the customers before he went to Guam. He had previously arranged for a shipment of 60 connectors to be shipped to Hong Kong and then re-exported to Iran, but export officials stopped the package before it left the US.

After an unsuccessful conversation with Alan Berkowitz, an officer at the US Department of Commerce, Chen had given up on getting the shipment released.

Chen told Berkowitz that the connectors would be used to repair the hydraulic valves of the air conditioner of a subway system. Berkowitz then told Chen the information he provided was not sufficient and, in order for the shipment to be released, Chen would need to provide detailed information from the subway end user, including the location. Chen did not do that.

Luckily, Chen later found a friend, or rather, a friend found him. After the first shipment was stopped, an employee from the connector company e-mailed to say he could help complete the order, off the books.

The friend said Chen's business, Landstar Tech, in Taiwan, might be flagged by the US government.

'I have experience in getting around US regulations and customs. I have for many years been able to get shipments to my customers who are located in countries that the US prohibits [companies] from doing business with. I have been extremely successful in doing this,' the employee e-mailed to Chen.

'Plus, with your help, I may be able to establish a reliable 'friend' in Taiwan to assist me with my future needs of getting things into the Middle East. Dubai used to be a great place for this purpose, however, things are getting to [sic] hot there right now. I need to start looking for other places to transship the goods.'

Chen quickly replied. 'I am very glad to know that you are so flexible to the business. This is very helpful for us.'

'We really have to meet each other and discuss our plans for future business,' he wrote in a follow- up e-mail.

There was some back and forth about logistics - the friend couldn't ship to Shanghai or meet in Hong Kong or Taiwan; Chen couldn't travel to Saipan. He suggested they get together in Guam before the Lunar New Year to close the deal and talk future business. The friend agreed to hand-carry the connectors and seals and Chen booked his ticket.

But the meeting never happened.

GUAM, WHICH BILLS itself as an 'international hub for travel to Asia and the Pacific region', is an unincorporated US territory. And Chen's 'friend' was an American undercover agent, working for the Office of Export Enforcement at the US Commerce Department's Bureau of Industry and Security.

Chen was arrested in Guam on February 3 last year. The following day, US Magistrate Judge Joaquin V.E. Manibusan Jnr ordered US marshals to remove Chen to Florida, where he would stand trial.

US prosecutors argued Chen 'did knowingly and willfully export and attempt to export and cause to be exported US-made goods from the United States to the Islamic Republic of Iran by way of Hong Kong and Taiwan without having first obtained the required authorisations'.

Ironically, Chen wrote in an e-mail to the undercover agent: 'I don't [trade in] ... sensitive items because this is too risky and this is not my main business.' In another e-mail, he added: 'What we want is to do business by means of safe and low profile then nobody gets hurt.'

The West has imposed increasingly strict sanctions on Iran. The sanctions' objectives are, say the Western powers, twofold - to pressure Iran into non-proliferation negotiations and to stop the flow of technology into its nuclear programme, which the Iranian government maintains is solely for peaceful purposes.

Pressure has been mounting on Iran since the United Nations passed its first round of sanctions, in 2007. The heat was turned up last June, when the UN Security Council, led by the US and with the support of China, voted to implement a fourth round of sanctions, followed soon after by even harsher restrictions imposed by the US, the European Union, Japan and Australia. Under pressure from the US, South Korea temporarily closed 102 companies believed to be helping Iran's nuclear programme in September, including the Seoul branch of Bank Mellat, an Iranian bank that handles about 70 per cent of South Korean exports to Iran.

The US also successfully enlisted greater co-operation from the United Arab Emirates, which has long been the major re-export hub to the Middle East, particularly Iran.

The UAE passed its first national security export control law in 2007 and has assisted US enforcement efforts. UAE officials also pledged to more closely regulate goods sent to Iran.

'The Iranians have been [using Dubai as an export hub] for years,' wrote Matthew Levitt, director of the Washington Institute for Near East Policy's Stein Programme on Counterterrorism and Intelligence, in Britain's Guardian newspaper. 'But, as the Emirates have begun to crack down, new countries have emerged as safe havens, with Malaysia at the top of the list. Hong Kong is also becoming more of a problem in this area, with Iranian front companies and procurement agents setting up shop there.'

Hong Kong is particularly attractive to Iranians seeking American dual-use goods because of the1992 US-Hong Kong Policy Act, which treats the city similarly to Western nations with regard to export controls. Hong Kong is therefore able to import many sensitive technologies that could not be shipped to the mainland or Macau, and certainly not to Iran or North Korea. Moreover, the sheer volume of goods passing through Hong Kong, which has the world's third-largest port, attracts businesses looking to slip through the cracks.

'Export controls are a major issue here, precisely because Hong Kong is such an open and vibrant entrepot,' US Consul General to Hong Kong Stephen Young said last summer. 'Whether it's shipping or aircraft or land, things pass through here at a bewildering pace.

'We share with our colleagues in the Hong Kong government ... an interest in getting a better handle on this,' he said. 'Because, let's face it, the bad guys are going to look at places like this as targets of opportunity and I think, particularly these days, Iran and North Korea, but there are others.'

Hong Kong authorities have been trying to stem the flow for years. On June 24, 1997, in its final meeting before the handover of the city to China, the Executive Council voted to shut down a company called Rex International Development. Owned by state-owned China North Industries (Norinco), the company was accused of selling high-grade seamless steel pipes, suitable for use in chemical and explosives manufacturing, to an Iranian chemical weapons plant. The company reportedly had an office in Tehran, where it had been involved in setting up a factory which could produce precursors for chemical warfare and an armament production line.

The government wanted to close down Rex because it did not want 'this sort of activity' to become a problem in the early days of post-handover Hong Kong, a security source told the South China Morning Post in 1998.

The Rex case was unravelling as American officials were asking how Hong Kong's reversion to China would affect US national security and non-proliferation interests. In May 1997, the US Government Accountability Office (GAO) issued a report confirming Hong Kong would continue to have greater access to sensitive technology than the mainland, citing the city's strong record in maintaining an effective export-control system and its co-operation with the Americans.

Between 1984 and reunification with China, the Executive Council shut down eight companies. In 1995 alone, the government closed seven companies, including four - Mainway International, Worldco (Hong Kong), Asian-Ways, Asian-Ways Holdings - which reportedly provided corporate fronts for deals that involved the sale of poison-gas ingredients from China to Iran. (Since the handover, no companies have been shut down by the Executive Council under the law which allows it to do so for 'undesirable activities'.)

The US had a vested interest in helping preserve Hong Kong's autonomy after the handover. According to the GAO report, 'State officials noted that, in the absence of any evidence that Hong Kong's export control system is not working effectively, the State Department would not support a pre-emptive decision to modify existing US export control policy. To do so could risk becoming a 'self-fulfilling prophecy' that would result in less autonomy for Hong Kong.'

In 1998, the US Bureau of East Asian and Pacific Affairs praised the pre-handover closure of Rex International, touting it as an example of 'Hong Kong's efforts to sustain rigorous enforcement of export controls'. What it did not mention, however, was what happened to Rex after reunification.

Two weeks after the handover, Rex went to court and challenged the government's decision to shut the company down. After just one day in court, the government made a surprising settlement that allowed the company to re-register and wind itself up, allowing the assets to be distributed among shareholders. Government officials denied any sort of deal had been cut.

'The settlement completely meets the objectives of the original ExCo order under the Companies Ordinance. We firmly believe that the settlement is in the public interest,' a government spokesman said at the time.

The South China Morning Post considered the meaning of the settlement: 'The proceedings were reportedly being watched closely in the United States as a test of Hong Kong's judicial independence and the SAR's commitment to internationally agreed controls designed to stop the spread of nuclear, chemical and biological weapons. Yesterday's outcome sheds no light on either question.'

Soon after Rex was dissolved, a new company, Throne Star International moved into its office at the Shun Tak Centre. And Rex and Throne Star shared a director, Jiang Chengwei, who joined Rex in 1994 and rose to prominence in China's defence industry as a composite dynamite specialist in the Ministry of Ordinance Industry, which later became Norinco. Rex's factory, which stopped production for a few months in 1997, started up again under Throne a few months later.

CHEN FIRST CAME onto the radar of US investigators in late July 2008. The Office of Export Enforcement, in Miami, Florida, had been investigating efforts by Iranians to procure US-made goods by combing through US-based e-mail accounts. Investigators were looking into attempts by Iranians to procure Exploding Foil Initiator (EFI) detonators, which are used in missiles, explosives and weapons technologies. They are subject to trade restrictions for national security reasons and can be exported only under licence.

Investigators met with representatives of a Californian company that produced the detonators and learned it had received a suspicious e-mail from a man named Kevin Chen, who requested a quote for 2,000 EFI detonators, along with a test kit and bridge cables. Chen had used a US-based e-mail account to send the request.

Chen broke off contact before the sale was completed but it was enough for investigators to get a search warrant for Chen's e-mails.

According to prosecutors, these e-mails revealed that from early 2007 to early last year, Chen facilitated the export of more than 30 illegal shipments of US commodities to Iran, in many cases by way of Hong Kong.

One e-mail from someone calling himself 'Ali' read: 'Hello dear Friend Kevin, how are you? I hope best wishes for you. You know we need some connectors that I have attached photos of it for about 60 pieces. Its order code is MS3132H7Y50P. We need male part.

'You know, Iran is under sunction! [sic] So would you please contact following address to see if they have such connector in stock and what about price?'

According to investigators, Ali was e-mailing on behalf of Noavaran Sooyab Sanat Co, in Tehran. Sooyab Sanat was founded in 1989 as an instrumentation division of Jahad Engineering Research Center, one of the many names used by the Engineering Research Center for the Construction Crusade (Jihad-e Sazandegi) in Tehran, which has been linked to chemical research and development facilities. The British government listed Jahad Engineering Research Center as an entity of concern in 2006 for Weapons of Mass Destruction-related procurement, according to the Wisconsin Project on Nuclear Arms Control (WPNAC).

On August 22, 2009, Chen replied to Ali: 'As you know we cannot tell USA this connector is for you. So we have to tell a white lie to USA that this is for our factory in Hong Kong, so USA will ship to our office in Hong Kong. We will ship these 60 pcs of connector to you from Hong Kong by ARAMEX. So please kindly arrange the US$5,300 to the below bank account.'

Chen gave details of the Hong Kong HSBC account of his company, Landstar Tech.

Chen placed the order with the US supplier, listing a company in Hong Kong, Tex-Co Logistics, as the end-user. Chen stated the items would be used in manufacturing and would not be re-exported.

Tex-Co Logistics is a freight-forwarding company. According to prosecutors, Chen had previously used Tex-Co Logistics to send items to Iran, including a shipment of 5,000 glass-to-metal seals in November 2008. E-mails show Chen listed Tex-Co Logistics as the end-user for the seals, but forwarded the seals to a second customer in Iran instead.

According to investigators, in at least one transac- tion with Chen, this second Iranian customer was working on behalf of Electro Sanam Industries, which according to WPNAC, is a front company for Aerospace Industries Organisation. AIO conducts research and development on ballistic missiles and is a leading industrial and military subsidiary of Iran's Ministry of Defence and Armed Forces Logistics, according to prosecutors.

Electro Sanam was named for links to nuclear proliferation activities in the Security Council resolution against Iran in 2008.

On May 13, last year, Chen pleaded guilty to violating the Iran embargo, admitting that he knowingly and wilfully conspired to ship the connectors and pin seals to Iran without obtaining the proper licences. At his sentencing hearing on August 27, Chen told the judge: 'Because of my ignorance, I violated US law. I am very, very sorry.'

US District Judge Adalberto Jordan sentenced Chen to 3 1/2 years in prison, citing his remorse, lack of prior criminal record and immediate admission of guilt as reasons for the light sentence.

'I don't believe any longer sentence is necessary to protect society from criminal conduct in the future,' Jordan said.

Months earlier, the US Department of Commerce blacklisted Chen, Landstar Tech, Tex-Co Logistics and seven affiliated individuals and businesses in Hong Kong and Taiwan for 'acting contrary to the national security or foreign policy interests of the United States'.

Tex-Co Logistics and Acteam Logistics, another Hong Kong freight forwarder prosecutors say worked with Chen, remain active, according to the Hong Kong Companies Registry.

More than 13 years after the handover, it is unclear where Hong Kong, as a special administrative region of China, stands on proliferation enforcement.

In 1998, the US State Department wrote, 'We have seen no evidence of Chinese central government involvement or interference in Hong Kong export control decisions. Chinese central government officials have made clear on several occasions that they consider export controls a trade - not foreign policy - issue, and thus within Hong Kong's sphere of autonomy.'

The US has, however, in recent years expressed concern to allies about the transfer of arms and technology to Iran. In a 2008 diplomatic cable released by WikiLeaks, the State Department, under the George W. Bush administration, launched a major diplomatic effort to persuade China to address prolifer- ation concerns.

'Over the past several years, the US has made repeated approaches to Beijing at all levels regarding transfers by Chinese entities of weapons-related items to Iran, as well as transshipments of concern via Chinese sea ports,' wrote Patricia McNerney of the US Bureau of International Security and Nonproliferation, although she didn't specify whether Hong Kong was one of those ports.

'While China's nonproliferation record has improved in some areas, certain state-owned Chinese entities and private firms continue to export or transship key items and/or dual-use technology needed to develop weapons of mass destruction or their means of delivery, as well as conventional weapons to Iran.'

While it is difficult to quantitatively assess Beijing's influence over Hong Kong officials in the area of enforcement, observers point to recent cases as evidence of Beijing's lackadaisical attitude towards export controls, in the mainland and Hong Kong.

'The Chinese government has also been stepping in to protect Iranians targeted by US enforcement efforts,' wrote Michael Jacobson in a report titled 'Cracking down on Iran's Illicit trade', published by US-based think tank the Washington Institute, noting the case of Iranian procurement agent Yousef Boushvash in 2007.

Hong Kong arrested Boushvash at America's request for attempting to acquire F-14 fighter plane parts. But when the US sought his extradition, Beijing officials ordered his release and he disappeared.

'There have certainly been a lot of cases involving Hong Kong shell companies recently,' says Matthew Godsey, senior research associate at the Wisconsin Project, citing the conviction of two Chinese nationals, Alex Wu Zhen Zhou and Annie Wei Yufeng, and the company they operated, Chitron Electronics, for illegally exporting electronic equipment from the US to the mainland through freight forwarders in Hong Kong. A number of Chitron's customers were insti- tutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development and manufacture of electronics for the Chinese military.

'It seems to me, Hong Kong, in the way of export controls, is more organised and has more structure to it than the mainland,' Godsey says. 'Hong Kong has a kind of a laissez-faire approach. It hasn't felt a need to crack down hard.

'China has wanted to maintain Hong Kong's credibility as a financial and economic centre. They don't want to be heavy-handed in terms of business,' Godsey says. 'If there were a big policy decision, having something to do with sanctions, I believe China would have influence.

'You can imagine what could happen if Hong Kong were really to start cracking down on freight forwarders who sent things on to China, when the final end-user is a Chinese institute,' Godsey says. 'If Hong Kong were to crack down and highlight those cases, it wouldn't go down very well.'

Hong Kong maintains a list - compiled from international conventions - of strategic commodities for which an export or import licence is required. Over the past three years, there have been 126 prosecution cases in connection with this list.

Part of the US case for treating Hong Kong the same way as Western countries, however, was the 1997 pre-handover passage of the Weapons of Mass Destruction (Control of Provision of Services) Ordinance, which prohibits activities to be carried out in the SAR that may assist the development, production, acquisition or stockpiling of weapons capable of causing mass destruction. There have been no prosecutions under this legislation.

The Chemical Weapons (Convention) Ordinance came into operation in June 2004, which enables Hong Kong to comply with the Chemical Weapons Convention. There have not been any prosecutions under this law either.

After the UN passed its latest round of sanctions in June, Young expressed confidence in Hong Kong's commitment to fighting proliferation.

'We've talked about these [sanctions] with our colleagues and partners in the Hong Kong government ... And we have a willing partner here,' he said.

But nearly eight months on, Hong Kong has yet to enact legislation to give the sanctions the weight of law. Even after it was revealed last month that Hong Kong companies have played a key role in helping Iran's state-owned shipping line evade UN sanctions, the city's government has yet to say when it will enact legislation necessary to stop them.

Hong Kong is required by law to pass legislation to carry out Beijing's instructions with regard to such sanctions. A draft of the legislation must be approved by the central government before the Executive Council can act. The Legislative Council is not required to approve the bill and may not amend it.

Nineteen shipping companies registered in Hong Kong are nominal owners of ships previously owned by the Islamic Republic of Iran Shipping Lines (IRISL), which has been internationally censured for supporting Iran's nuclear and weapons programme.

As reported last month in the South China Morning Post, the companies were created at the request of IRISL, which began changing the names, ownership and registration of its ships in the summer of 2008, when the Security Council issued a resolution calling on member states to inspect cargoes to and from Iran on ships operated by IRISL over suspicions that prohibited goods were being carried.

The US government has blacklisted some of the Hong Kong companies involved with the Iranian shipping line but has not censured the agent at the heart of the network, H&T International Transportation, which is majority-owned by a Chinese state-owned company, China Hualian International Trading.

In the US, the Barack Obama administration has been criticised by Democrats and Republicans alike for not taking a stronger stance against China over enforcement of Iran sanctions. But the reticence is nothing new. When Hong Kong shut down companies for sending poison-gas ingredients from China to Iran in 1995, the US took no public action against China.

'[The Chinese] pay lip service to the rules but they still violate them, sometimes blatantly, knowing we won't protest at a high level. The primary reason we are looking the other way is market potential,' a senior US official told the Wisconsin Project's Risk Report in May of that year.

At a Congressional hearing about Iran sanctions last December, members of both parties admon- ished the Obama officials for their lack of action against China.

Democratic Congressman Brad Sherman, of California, who at the time was chairman of the Terrorism, Nonproliferation and Trade Subcommittee, excoriated American officials for their lack of action.

'China attacks us in a hundred ways: attacks the economic security of Americans, attacks the national security of our country, co-operates with and subsidises rogue regimes,' he said.

'And I don't blame so much Beijing as I blame Washington. We, in Congress, have a choice between two approaches. One is to continue to denounce China, in this room and others, in the hopes that our words will sting so badly that Beijing will change its policies. And occasionally we grant to the administration the authority to actually hit China a little bit, just as [the Comprehensive Iran Sanctions, Accountability and Divestment Act] would allow you to sanction Chinese companies,' Sherman said.

'But we know you are not going to do it to any significant degree,' he said.