Appendix 3: Memorandum from the Society
of British Aerospace Companies
Thank you for the opportunity to make comments
on the secondary legislation of the Export Control Act on behalf
of the UK Aerospace Industry. We continue to support the principle
of this legislation and welcome the introduction of a modernised
export control system. We have not, of course, yet seen the final
version of the Orders and these comments are based on earlier
drafts, as well as extensive discussions with the DTI.
The SBAC has over 180 members, many of them
small and medium-sized companies. Most will be affected in some
degree by the new legislation. In our original submission to the
Committee in March 2003, we drew attention inter alia to
the need for clarity in the legislation, the need to reach a balance
between effective controls and a successful export industry, avoidance
of additional delay in the process, the impact of extending controls
to intangible transfers of technology, the increased training
requirement and the consequences of the legislation for the Farnborough
International Airshow.
REGULATION
On the basis of the draft guidance issued by
DTI, industry is now more assured that the regulatory burden on
companies while likely to increase, will not be too onerous. The
DTI's intention to rely on Open General Licences to cover the
majority of intangible and trade transactions is welcome, though
industry will still be obliged to keep records in support of compliance.
The DTI have stated that they intend to rely as far as possible
on records kept for the company's own purposes (the "functional
approach"). There is likely to be an initial period of uncertainty,
until the exact nature of the original documentation necessary
to secure compliance is determined. In this respect, the DTI's
awareness seminars and its general communication to industry on
the regulations will be crucial during the implementation period.
A particular area of concern for SBAC members
is the new controls on Restricted Goods. These apply to Long Range
Missiles with a range of more than 300 km and components. We have
been informed that they will also apply to UAVs. This is extremely
onerous, with extraterritorial provisions and application to ancillary
activities such as publicity and transportation. This seems certain
to affect collaborative programmes with close allies.
TRAINING
This remains as our primary area of concern
and it is difficult to see that the training requirement can be
met by industry and the resources available in the DTI within
the proposed implementation period of six months. We accept that
the DTI will make every effort to ensure that companies are aware
of the new regulations and their requirements. However, we draw
a clear distinction between awareness and training. It must be
understood that, whereas in the past the licensing requirement
for physical exports could be met by a handful of specialists,
the new controls potentially apply to a wide range of industry
personnel who have never been affected by these issues before,
including engineers and designers, commercial staff and marketing
departments, and, in some cases, offshore subsidiaries.
The introduction of the new Export Control system
therefore contains a one-off requirement to train a large number
of people in their new responsibilities under the Act. In the
future this can certainly be accomplished through good internal
processes, standard induction and training schemes as well as
regular refresher courses. In the short term, we have serious
concerns about the level of preparedness in the industry at large
that can be expected by May 2004. Conscious of our duty of care
to employees exposed potentially to individual liability, industry
does not underestimate the size and complexity of the formal training
requirement that must be undertaken. We do not yet have visibility
of the training packages that will be available from DTI and we
are concerned that there are a limited number of specialists in
this field to deliver the quality and volume of training required.
Our larger companies face the major problems.
We are not convinced that the initial training requirement will
be confined even to project engineers, but will in practice embrace
a much wider population including foreign employees. For companies
such as QinetiQ, Rolls-Royce and Thales, this means that between
5,000 and 10,000 people need training, implying a training commitment
for each company in excess of six months. BAE Systems has put
their requirement at over 25,000 people, ie half their UK employees,
requiring basic familiarisation alone. To train this number of
people adequately will require at least 12 months, especially
since it has not been possible to anticipate the final version
of the regulations or the commencement date.
Industry will be working with DTI to ensure
that training packages and assistance in training will be available
to companies affected by the legislation. We have been assured
that the DTI will be preparing more specific training plans, estimates
of numbers to be trained and logistics schedules so that we can
explore this issue together more objectively.
IMPLEMENTATION
We note the DTI's assurance that companies should
not expect problems in transferring existing licences to be compliant
by May 2004. However, it will be necessary for companies to apply
soon for additional licences implying that they recognise the
need for action and that the DTI will be able to process these
applications. We will make every effort to advertise this and
other aspects of the legislation to our members. It is vital,
however, that the DTI has the capacity to process these applications.
There will be additional costs associated with training and implementation.
It is equally vital that the DTI's Compliance Unit has the resources
to discuss and agree with companies an acceptable compliance regime
based on the company's own records. We will continue to monitor
the impact especially on small suppliers of the increased compliance
requirement.
FARNBOROUGH AIR
SHOW
The DTI has sought to assure the SBAC that the
impact of the new legislation on trade shows and exhibitions will
be minimal. However, the global air-show circuit is increasingly
competitive and the SBAC fears that the new legislation could
still create a disincentive to sign major contracts in the UK
and lessen the commercial attractiveness of Farnborough as a global
business event. Nevertheless, we accept the DTI's view that the
bulk of transactions or "networking" conducted at Exhibitions,
such as Farnborough, will not be caught by the new legislation.
We will work to ensure that, for example, registration packs will
contain the necessary information for exhibitors and requirements
for visitors to abide by UK law. We would certainly welcome the
presence of a DTI "mobile licensing unit" during the
Farnborough event to aid in compliance.
WORKING TOGETHER
DURING THE
IMPLEMENTATION
Industry will seek to work closely with DTI
during the implementation period. The SBAC and other trade associations
are committed to assist in monitoring the practical aspects of
implementation and the accumulation of case law following compliance
visits. Industry is also prepared to work with DTI at a senior
level to oversee the implementation phase. In particular, we would
hope to develop a common understanding with the DTI of all potential
interactions between the Act and broader industrial development
issues, for example the implications for UAV development and wider
international collaboration.
October 2003
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