Quadripartite Select Committee Written Evidence

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]



  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.


  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.


  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.


  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.



  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.


  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.


  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.


  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.


  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.


  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:



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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