Overview of three broad areas of export control: experience of the new controls introduced in 2004; the operational strategy of the Export Control Organisation (ECO); and some aspects of the EU agenda.

(Presentation by Glyn Williams, Director of the Export Control Organisation, UK Department of Trade and Industry (DTI) at the  Global Trade Controls Conference, London 2-4 November 2005)

New UK controls
The Export Control Act 2002 set a new legal framework for controls, with clearer parameters on the scope and purpose of export controls, and greater transparency in terms of the criteria against which licence applications will be judged and disclosure to Parliament of decisions taken.

In May 2004 we introduced new controls on the following:

• electronic transfers of military technology  (there were already controls on the physical transfer of ML technology and electronic transfer of dual-use technology);
• trafficking and brokering of military list goods between third countries done from the UK;
• trafficking and brokering of “Restricted Goods” between third countries done from the UK or by a UK person anywhere in the world;
• trafficking and brokering of goods from a third country to an embargoed destination done from the UK or by a UK person anywhere in the world;
• end-use controls on technical assistance to a non-EU WMD programme provided from the UK or by a UK person outside the EU;
• end-use controls on the transfer by any means of software or technology within the UK, or from outside the UK, where there is reason to believe the technology may be used outside the EU on a WMD programme. 
  
  Note: the above are a paraphrase of the legislation, for full details please refer to the relevant legal texts and ECO guidance on the ECO website http://www.dti.gov.uk/export.control/legislation.htm  http://www.dti.gov.uk/export.control/publications.htm

In the run-up to their introduction exporters were concerned the controls  would be unduly burdensome to operate.  In fact they have proved to be manageable in practice.  

Number of licence applications
In the period November 2003 (when we started to take applications for licences under the new controls) to 1 August 2005, the number of individual applications has been as follows:
 

(*this figure encompasses licence applications with an ML22 [technology] line item rating; the transfer may have been by physical means and may also have been part of an export of goods)

One of the reasons why the figures for individual applications have been kept relatively low is that new Open General Export Licences (covering for example trade controls on transfers to and from most OECD countries; transfers to UK forces; and existing ones, eg for military technology) soak up many of the non-sensitive transfers.  We have also have worked closely with industry to ensure the legislation is not being over-interpreted.   

Tangible effect of the controls
The controls have, on the other hand, had a tangible effect.   In particular we have carried out a large awareness campaign as regards the trade controls, which represent a completely new departure and brings in many traders not previously subject to control.  ECO and HM Revenue and Customs have visited many traders or sent them guidance material.   We worked closely with the organisers of the last Farnborough and DSEI exhibitions to ensure foreign exhibitors were aware of their obligations, particularly as regards the promotion of Restricted Goods such as para-military equipment or long-range missiles.  At DSEI in September 2004 two exhibition stands were withdrawn because they were promoting para-military equipment.   Similar promotional material on websites has on occasion been changed, and trade deals have not gone ahead because a licence has been refused or the application withdrawn.

This is not to say that the controls are working in every respect as we intended.  It is simply too soon to draw any conclusions in that regard.  We are gradually accumulating experience and this will inform our review of the controls in 2007.  What we can say at this stage is that the initial signs have been encouraging: the controls are making a difference, and from an administrative point of view have been manageable.

Control of certain non-nuclear radioactive sources
One legislative development I should draw to your attention is the prospect that we may impose controls on the export of certain non-nuclear radioactive sources which are not presently controlled.  This is in response to an International Atomic Energy Agency Code on the import and export of such materials.  The object is to counter the threat that such materials may be sought by terrorists.   I expect a consultation document to be published towards the end of 2005.

ECO Operational Strategy
In 1997 published performance targets were set on the timeliness of  export licensing decisions.   The main target was that HMG should process 70% of Single Individual Export Licence (SIEL) applications within 20 working days.  In fact this target was never met in the years 1997-2002, and performance was in the 50-60% range.  

The problem was diagnosed as a failure of collaboration between the DTI, Ministry of Defence (MoD) and Foreign and Commonwealth Office (FCO), all of whom are integral to the decision-making process.    A new project, known as JEWEL, therefore aimed at finding ways of promoting cooperation.   The basic concept which emerged was to create a “single licensing community” consisting of the export control staff in DTI, MoD, FCO and the Department for International Development (DfID). 

No staff were physically transferred but the community adopted its own mission statement, newsletter, regular joint management meetings and joint staff training programmes.  This created a sense of identity and shared purpose – even running the project together was a useful exercise in itself -  which brought much more impetus to performance.   This was backed by tangible measures such as new business processes (notably what we call the “Smart Front End” which filters out and fast-tracks around 50% of SIEL applications) and a better-designed suite of performance targets (eg to complete 70% of SIELs in 20 days and 95% in 60 days, thereby creating pressure to deal with those that miss the 20 day target, previously a major failing of the system).

The result was that in 2003 and 2004 we exceeded the main targets for the first time ever and feedback generally from exporters has been very good.  We are also on track to meet the target, although with less margin, in 2005.

Staff reductions
ECO, in common with the rest of DTI, has had to reduce its headcount over the last year and we now have 115 staff where previously we had 155.   Clearly this is a challenging situation.   Our objective is to improve efficiency to be able to sustain performance at adequate levels with the reduced headcount.   We are therefore increasing the capabilities of staff through better on-the-job training programmes and multi-skilling so they can deal with all types of licences.   We are constantly looking at ways of streamlining business processes to take out unnecessarily cumbersome procedures and requirements.  We look to reduce caseload by steering SIEL applicants towards an Open General Export Licence (OGEL) if there is an appropriate one available.   We are seeking to make better use of  the information we hold on exporters so that we can adopt a more proactive stance to stakeholder management: spotting problem companies and addressing them directly.   We want to raise the competence of exporters to understand and comply with the system.  To this end we have improved the range and frequency of our regular seminars, which are now held in the regions as well as in London and which are graded in beginner, intermediate and advanced categories.   We have also produced a DVD on export controls.

Self-help tools
We want to build on these existing measures in new ways.   First we are developing more exporter “self-help” tools which will be available via our website.   The first one is called “Goods Checker” which will enable an exporter to identify whether his goods are subject to control, and in which category of the strategic export control lists.  This should be available by the end of the year.   

We are also planning a second tool for the first quarter of next year called the “OGEL Checker” which will identify appropriate OGELs for any given export.   I would eventually like to bring together all the component parts of ECO’s industry awareness activity under one brand on our website in order to make them more visible and accessible.

Work with partners
Second, we would like to work with partners wherever possible to ensure that our services reach the widest possible audience.    We have already collaborated successfully with the Defence Manufacturers Association in delivering training seminars.

Dialogue with UK exporters
Third, we want to deepen our dialogue with UK exporters.  We already have an advisory committee of the major relevant trade associations.  Recently we have agreed to set up working groups to consider in more detail some of the issues in the operation of the system and wider policy which are of mutual interest.

IT systems
Fourth, we intend to develop our IT systems.  The first priority is to improve internal workflows, although later we would like to offer application tracking facilities for exporters and electronic licences sent direct to HM Customs.     

De-mystifying the process
Finally we want wherever possible to de-mystify the export control process.  For example we have recently put on our website a note explaining how we operate the WMD catch-all control which amongst other things identifies the type of goods commonly caught.   We are currently considering whether we can put more information in the public domain about specific end-users of concern in certain countries.

The EU agenda (excluding COARM)
The UK currently holds the Presidency of the EU as a result of which I am chairing the Dual-Use Working Group which is concerned with the operation of the EC Regulation 1334/2000 on the export of dual-use goods.    The main item on the agenda is the implementation of the Peer Review.    This was carried out under the auspices of the EU’s Action Plan against Proliferation of WMD. 

In 2004 experts from “old” Member States worked with the “new” states to spread best  practice on export controls and identify any weaknesses.   The aim is to reinforce the effectiveness of export controls on dual-use goods in an enlarged Europe.  The EU is a major producer of the sophisticated goods and technologies sought by proliferators.  It is vital for global security to ensure that Regulation 1334/2000 is administered in a consistent and effective manner across the Union by the Member State licensing authorities.  And of course EU industry wants a level playing field and predictability.  The Peer Review produced a number of recommendations for further action which the Council agreed in December 2004. 

Best practice
Much of the work has focussed on the identification and dissemination of best practice, rather than inventing new controls.   The themes pursued in this way have included

• intangible transfers of technology,
• interaction with industry,
• operation of the catch-all control and
• recognition of controlled goods.  

In addition it has been agreed to establish an electronic database to record denial notices made by Member States under the Regulation, following technical work to prove the concept and basic design.    This database will significantly enhance the capability of the Member States to exchange information quickly in order to thwart attempts simultaneously to procure similar goods in several Member States.    The Commission is also considering amendments to the Regulation to introduce controls on transhipment of goods.  These already exist in the UK but not all Member States have them.

Transfers of defence equipment within the EC
Finally the European Commission directorate-general responsible for industry and enterprise has recently published a study on transfers of defence equipment within the EC (defence equipment is excluded from the dual-use Regulation and transfers within the EC are subject to Member State export controls).  The study questions whether  the current level of controls is proportionate to the risk, noting that licences for intra-EC transfers are rarely denied.   It floats the idea that some exporters should be “certified”, ie deemed to be competent to comply with export control obligations, in return for which they would be given greater freedom to export within the current system.  The details and practicalities are not yet clear.  However any reasonable proposal to simplify controls without weakening them deserves serious consideration and we shall be discussing it with UK exporters.   The general idea of simplification could also inform ongoing discussions amongst the Framework Agreement countries about ways to free up trade in controlled goods between them.

Export Control Organisation
October 2005