Bring first 3 ingredients to a boil in a saucepan over medium heat; cook 7 minutes, without stirring. Stir in condensed milk, and bring to a boil; cook, stirring constantly, 10 minutes or until a candy thermometer reaches 245°. Remove from heat, and stir in vanilla. Pour into a lightly greased aluminum foil-lined 8- x 8-inch baking dish. Let stand 8 hours at room temperature.
Cut caramel into 1/2-inch squares, and shape into balls.
Melt chocolate and shortening in a saucepan over medium heat. Remove from heat. Dip balls into melted chocolate mixture; place on wax paper. Chill 8 hours.