Examination of Witnesses (Questions 240-242)
MR DAVID
HAYES, MR
BRINLEY SALZMANN,
MS BERNADETTE
PEERS AND
MR DAVID
WILSON
19 APRIL 2006
Q240 Chairman: But to export a flat
pack that amounts to 80% of the final product (i.e. a military
vehicle) is not licensable?
Mr Salzmann: If all the components
which are in it are NLR (no licence required), then yes.
Q241 Chairman: Exactly, yes. That
is a contrast, for the record, which is of some interest to many
of us, I am sure. I have taken over your point. Forgive me.
Mr Wilson: I said I would cover
some of the other issues that an export compliance person needs
to consider. I work for a company that is a subsidiary of a US
company, and the US, of course, has export control laws that are
super-national and extraterritorial; so if I wish to export from
the UK something that has itself come from the US or that contains
a significant proportion of technology or material that has itself
come from the US under licence, not only do I need to apply for
a UK export licence, if that is necessary, but I also need to
apply for an American one. If a company does not have a US parent,
the only way they can get a US re-export licence is by going back
to their original supplier and saying, "You sold us this
piece of kit. What I now want to do is sell that on to someone
else. Can you please go and apply to the appropriate US authority
for a licence to do so?" The other slight difference with
America—there are two things there—International Traffic
in Arms Regulations and Export Administration Regulations. Traffic
in Arms Regulations are controlled by the State Department, i.e.
defence, and they broadly equate to the UK military list. The
Export Administration Regulations broadly apply to the EU dual-use
list, and in fact the lists in those cases are identical because
they both came out of the Wassenaar Arrangement. The application
and interpretation of them is slightly different. One of the big
differences is re-exporting of cryptographic material. You are
probably aware that something as simple as Windows XP contains
cryptography—bits of it are encoded. Microsoft makes Windows,
they put a certain level of encryption in it and they sell it
off to the UK. If I wished to re-export that from the UK, I need
to ascertain what that level of encryption buried in that commercial
off-the-shelf product is, and we are back then to David Hayes'
earlier comment. How do I find that out? I go to Microsoft in
the US and get by way of answer a raspberry. The DTI, to be fair,
have been extremely good about this. They have now come out and
said, "Okay, if the Americans have accepted a given classification
which allows it to be exported with minimal limitations, even
though it is classified as dual-use goods, then we, the UK, will
allow you to accept an American classification"; so thank
you to the DTI for that particular one. There is one other US
re-export issue which leaps out and bites the unwary. The American
export system is based on people, not places, primarily. If I
import something from the US—technology, for example, for
designing military aviation, military aero engines—that
will come across from America with a licence from the US State
Department that says, "Yes, you may export this from the
US to the United Kingdom," if I give access to that technology
to anybody who is not a United Kingdom citizen, I have perpetrated
a US export. It is called a "deemed export" and causes
me considerable grief. It means that I have to know the nationality
of who is being given access to US-sourced technology, which does
not sit easily with the EU employment and transferability of employment
legislation. It is an unresolved question, I do not think it is
going to be resolved and we try to get round it whenever we can.
Those are the American issues. Each EU country has its idiosyncrasies.
Germany, for example, has a war weapons licence. If you want to
transit war weapons—guns, tanks, what the man in the street
would know as arms—you would need to apply for a war weapons
licence in addition to all the standard EU licences, which comes
from a different part of the German bureaucracy. You need to know
about that, otherwise it gets held up. In Italy the standard individual
licence needs to go to the Customs office, which is probably in
Rome, some considerable distance from where your exporter may
be. Going back to Bernadette's comment earlier about the new export
system and it being primarily a revenue-raising system rather
than an export control assister, Annex four goods are those that
are on the dual-use list but are deemed by the EU to be particularly
sensitive dual-use equipment. If you export them, you do need
a licence to export them within the EU, unlike the majority of
dual-use goods which are free circulation within the EU, and you
need a licence to do so. So you take your licence and the freight
forwarder types the commodity code, or whatever, into the new
export system and the new export system comes back and says, "No
licence required", because it is free circulation within
the EU. It is just another little hiccup that the system needs
to be aware of.
Chairman: Thank you very much indeed.
Are there any quick final questions?
Sir John Stanley: We have had, I thought,
a most useful briefing on a great deal of the all-important detail,
and this is another area where the devil really is in the detail
as well as in the wider policy, but, Chairman, I wonder whether
it might be possible for the EGAD to let us have a paper, before
we see HM Revenue and Customs, in which they just list the particular
improvements that they would like to see, in the present system,
but falling firmly within the parameters of not doing anything
that is going to damage the tightness, such as it is, of the existing
export control system. I think it would be very helpful to have
your specific proposals in front of us before we have that next
session.
Q242 Chairman: I appreciate that
we are asking for even more work, but if that were possible it
would be very helpful. Clearly the transcript of today's proceedings
will no doubt suggest a few obvious errors, but if you could do
that we would be really appreciative.
Mr Salzmann: We have an Inland
Revenue/Customs Sub-Committee.
Chairman: I thought you would have a
long list already, but thank you, John, I think that is important.
David, can I thank you and your colleagues very much indeed. I
think it has been an incredibly helpful session, as John has said.
We have learnt, I think for the first time in such detail, the
way you interface with the control regime and that is very helpful
to us. There are a number of issues you have raised today which
we will have pleasure in pursuing with either Ministers or Revenue
and Customs or whoever the appropriate authority might be happen
to be. Thank you very much indeed.
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