Supplementary memorandum from the Export
Group for Aerospace and Defence (EGAD)
[Memorandum submitted with slides for presentation
which was given to the Committees on 19 April 2006; slides are
reproduced below]
LICENCE TYPES
SIEL STANDARD INDIVIDUAL
EXPORT LICENCE
To apply for a SIEL a Company has to have an
Authorised Signatory and a reference number, or, to submit online,
to have a Government Gateway reference number.
Application has to be made through ELVIS (Electronic
Licensing Via the Internet System).
Application to be submitted with three copies
of technical specifications, an End User Undertaking, the printed
application form and all the application data on a disk or floppy
(if not submitting on-line) and a signed application statement
by the Authorised signatory.
Once the application is received at DTI the
data is entered onto their IT system and circulated to FCO, DfID
and MoD. After circulation and decision the licence, or its refusal,
is sent to the applicant. The SIEL is valid for two years or until
exhausted by quantity or value and must be returned to ECO, when
exhausted. If this licence is refused a company can appeal the
decision.
A SIEL needs to be decremented by HMRC because
the licence is quantity specific, value specific and is for one
destination only. For Heathrow, the SIEL needs to go to Wayfarer
House for this to happen. The licence is then returned to the
exporter for re-use or, if exhausted, returned to DTI.
OIEL Open Individual Export Licence
Application through OLLIE (Open Licensing Liaising
with Industry Electronically). There is no provision to apply
on line for this licence, but, as with the SIEL, a requirement
for an Authorised Signatory reference number.
As with the SIEL, three copies of technical
specifications are required. No EUU is required at application
for this licence. As with the SIEL, this licence application is
circulated to OGD's. This licence may not be quantity specific,
may be for multiple destinations and is not value specific.
On receipt of the OIEL the company must register
its use on the export documentation, and obtain consignee undertakings
to cover the export. With the OIEL a company can obtain one consignee
undertaking for each recipient of the goods for a twelve month
period. The OIEL is valid for either two years for a Military
OIEL and three years for a Dual-Use Goods OIEL, although longer
periods may be now possible (eg for the known duration of a contract).
The OIEL is a concessionary form of licence and can be refused
or withdrawn, the company would then need to apply for SIELs.
By being the holder of an Open licence the Company
will be audited by ECO.
OGELS OPEN
GENERAL EXPORT
LICENCES
These are published documents, available to
examine on the DTI website. To use most OGELs a company must register
with the ECO Compliance Unit providing a VAT number, and an address
where records can be audited.
There are conditions and exclusions applicable
to all OGELs and these require extremely careful reading as the
wording and structure (eg the destinations listed may be those
permitted or those not permitted) differs from OGEL to OGEL.
When using an OGEL the whole title of the licence
is to be referenced on the export paperwork. With some Military
OGELs there is a requirement to get prior permissions from the
MoD(UK) before use, or a copy of a contract, purchase order or
Undertaking to comply with the conditions of use.
By registering for these Open licences, the
company will be audited by ECO.
Community General Export Authorisation CGEA—A
Dual-Use OGEL
A Community licence permitting the export of
Dual-Use goods from any Member State to seven destinations, namely:
Australia, Canada, Japan, Norway, New Zealand, Switzerland and
USA.
ARTICLE 21(7) DECLARATION
Dual-Use goods on Annex 1 of the EU Control
list have free movement between EU Member States. This does not
apply to Annex 4 goods, which require a SIEL from the EU.
Trade Control Licences (Traffic and Brokering)
There are three types of Trade control licence,
SITCL, OITCL, OGTCL.
Standard Individual Trade Control Licence (SITCL)
This licence is issued on application to a named
trader involved in trading of a set quantity of specific goods
between a specific source and a specific consignor, consignee
and end-user. Usually valid for two years, and on expiry to be
returned to ECO.
Open Individual Trade Control Licence (OITCL)
This licence is issued on application to a named
trader involved in trading of specific goods between sources and
destination countries and/or to consignor(s), consignee(s) and
end user(s)
Open General Trade Control Licence (OGTCL)
This licence is for trading activities of most
Military goods to or from specific countries. Registration is
required for this licence.
EXPORTING
Records to be retained for at least four years,
but duration can vary from OGEL to OGEL.
A SIEL needs to be decremented so must go to
HMRC for this to be done. Certain offices do not know how to do
this!
With the Open licences, the number or title
needs to be quoted on the export paperwork.
With the OIEL and with some OGELs copies of
undertakings or other permissions need to be retained for audit.
It is advisable for the exporter to have a copy
of the Customs entry to demonstrate the goods have been entered
for export correctly, but this is not always straightforward.
CLASSIFICATION (RATING) OF GOODS/TECHNOLOGY
INTRODUCTION
1. "Rating" is the term used by
the DTI to describe the process whereby a determination is made
as to whether an item is "caught" by export controls
and, if so, under which control list "entry" it falls.
2. Rating is the keystone which supports
the export compliance process. If the rating is incorrect, all
subsequent decisions and actions will be based on false premise.
3. The control lists themselves are largely
based on the main multilateral regimes: Wassenaar Arrangement
(WA), Nuclear Suppliers' Group (NSG), Australia Group (AG) and
Missile Technology Control Regime (MTCR). The control lists of
different countries do however differ.
DUAL-USE
4. The dual-use list (annexes to EC Regulation
1334/2000 as most recently amended by EC Reg 394/2006) is a complex
document to understand and correctly apply. The list itself (excluding
preamble, definitions and annexes subsequent to Annex 1) runs
to over 190 pages of technical descriptions, many of which are
not expressed in terms which are familiar in the industries most
likely to be affected by the controls.
5. The goal of such a level of descriptive
description (the word "precision" has been deliberately
avoided because in many cases descriptions are at once prescriptive,
detailed and vague) is, presumably, the laudable one of removing
from control those items which are similar to those which are
intended to be controlled but are not considered to be of concern.
The impact is such that a detailed understanding of both products
and controls is required to apply the latter correctly.
6. There are several examples within the
controls of "empty boxes", ie a control which has been
written in such a way that nothing actually falls within the scope
of the definition given. There are others where the level of detail
required to determine whether an item is controlled may not be
available to the exporter other than the OEM (nor even to a Government
licensing officer), thus rendering a meaningful decision impossible,
eg entry 1A001c requires a knowledge of the chemical composition
of seals, gaskets etc in order to establish whether the part is
controlled.
MILITARY LIST
7. The "Military List" (Part I
of Schedule I to the Export of Goods, Transfer of Technology and
Provision of Technical Assistance (Control) Order 2003) is generally
regarded as being much easier to understand and apply than the
dual-use controls. The main difference is that the basis of control
is design intent, as distinct from technical parameters in the
dual-use controls. Essentially, any item which has been specially
designed or modified for military use is controlled.
8. There are however, some areas of difficulty.
One of these is that there is no definition of "specially
designed or modified" and different countries apply different
interpretations. There is also the question of the treatment of
software versus technology and the differences in handling of
the two.
9. Overall, the military list is easier
to understand and apply correctly than is the dual-use list. This
may be one reason for the apparent lack of awareness of dual-use
controls and should be the cause of considerable concern, given
that most materials and technology which a terrorist would require
for a weapon of mass destruction (WMD) are actually dual-use and
not military. The greatest scrutiny is currently given to exports
which pose the least risk in the modern arena of asymmetric warfare
and counter-terrorism. This is not an argument for relaxing military
controls, rather for more rigorous application of the extant controls
on dual-use items, especially those with a WMD utility. HMG currently
licences UK companies to have technical exchanges with our own
MoD in the area of "relevant use" but little scrutiny
is given to dual-use exports and exporters.
END-USE
CONTROLS (CATCH
ALL)
10. End-Use controls may be divided into
two categories: WMD and Military.
11. The first, and often confusing, point
to appreciate is that end-use controls apply only to goods and
technology which are not, of themselves, controlled. The logic
supporting this position is that controlled goods are subject
to licensing and end-use considerations form part of the licensing
process, thus end-use only requires separate consideration where
the licensing process does not otherwise apply.
12. WMD end-use is fairly self-explanatory
and the DTI and other agencies provide good guidance concerning
how to identify transactions of possible concern in this area.
13. Military end-use is a control under
EC Regulation 1334/2000 which renders any export of uncontrolled
dual-use goods for end use by the military in a country subject
to an arms embargo potentially licensable.
SUMMARY
14. Licensing decisions require complex
decisions to be made whereby technical knowledge relating to products
(not necessarily owned by or familiar to the exporter) has to
be considered against complex legislation in order to arrive at
a decision regarding the export control status of an item.
15. This is not an activity to be taken
lightly and requires considerable resource and commitment. EGAD
is currently engaged with a leading UK university in developing
accredited training in the area of export controls which it is
anticipated will be available to industry, government, academia
and any other parties who may require an informed appreciation
of export controls and the industrial and political environment
in which they operate.
AUDIT
The DTI Code of Practice for Export Control
Compliance, Appendix 7 provides the following guidance regarding
what an exporter can expect from a compliance visit:
APPENDIX 7
EXPORT CONTROL
ORGANISATION COMPLIANCE
VISITS
What are compliance visits for?
To promote understanding of the UK export control
regime, particularly with regard to end-use concerns.
To examine records to ensure that UK export
licences, particularly Open Individual and Open General Licences,
are correctly used by the holder and that the terms and conditions
are being met.
What does the compliance visit cover?
Overview of company/operating unit—including
organisation; structure; products and services; markets; export
activity.
Applicability of UK export controls—review
position of items against controls. Where a representative of
the ECO Technologies Unit or other government agency (eg MoD)
is involved in the visit, it would be helpful if relevant technical
staff could be made available for part of the discussion.
Documentation trail—how orders are received
and processed, and how records are maintained.
Suspicious enquiries/orders—how these
are identified and handled.
Shipping—who administers shipping and
what methods of movement are used.
Inspection of records—to ensure that the
terms and conditions of licences have been met fully.
Who should be involved in the visit?
Line manager for export administration/shipping
functions and relevant personnel.
Marketing/sales/project managers.
Technical personnel.
April 2006
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