House of Commons - Quadripartite Committee

Quadripartite Select Committee Written Evidence

Further memorandum from the Foreign and Commonwealth Office

QUARTERLY REPORT FOR APRIL TO JUNE 2006 WITH ANNUAL REPORT FOR 2005 AND QUARTERLY REPORT FOR JANUARY TO MARCH 2006

SECTION A: SPECIFIC LICENSING DECISIONS (QUARTER 2 (2006))

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1.(x) Uruguay: why are there 40 OIELs.

An error was made during the preparation of the report, and the information for the United States of America was duplicated under Uruguay. This will be amended and a revised report issued.

Corrected entry for Uruguay as follows:

URUGUAY

Licenses issued or where coverage was amended during the period by the inclusion of reinstatement of this destination.

No Type Goods Summary

1. P Components for body armour.

2. P Components for naval radars, technology for the use of naval radars, military navigation equipment, components for military navigation equipment, technology for the use of military navigation equipment.

3. P Components for ejector seats, ejector seats, military aircraft ground equipment, components for military aircraft ground equipment, military parachutes, components for military parachutes, military distress signalling equipment, components for combat helicopters, components for combat aircraft, components for military search and rescue aircraft, components for military surveillance aircraft, components for military training aircraft, components for military transport aircraft, components for military utility aircraft, components for military utility helicopters, components for tanker aircraft, technology for the use of combat aircraft, technology for the use of combat helicopters, technology for the use of military search and rescue aircraft, technology for the use of military training aircraft, technology for the use of military transport aircraft, technology for the use of military utility aircraft, technology for the use of military utility helicopters, technology for the use of ejector seats, test equipment for combat aircraft, test equipment for combat helicopters, test equipment for military search and rescue aircraft, test equipment for military training aircraft, test equipment for military transport aircraft, test equipment for military utility aircraft, test equipment for military utility helicopters, test equipment for ejector seats, equipment for the use of combat aircraft, equipment for the use of combat helicopters, equipment for the use of military search and rescue aircraft, equipment for the use of military training aircraft, equipment for the use of military transport aircraft, equipment for the use of military utility aircraft, equipment for the use of military utility helicopters, equipment for the use of ejector seats, military aircraft ground equipment.

4. P Military aircraft ground equipment, military transport aircraft, components for military transport aircraft, technology for the use of military transport aircraft, technology for the use of components for military transport aircraft, technology for the use of military aircraft ground equipment.

5. P Technology for the use of military distress signalling equipment, technology for the use of ejector seats, technology for the use of military aircraft ground equipment, technology for the use of test equipment for ejector seats, technology for the use of equipment for the use of military distress signalling, technology for the use of equipment for the use of ejector seats, technology for the use of test equipment for military distress signalling, components for combat aircraft, components for military training aircraft, ejector seats, components for ejector seats, general military aircraft components, military aircraft ground equipment, military distress signalling equipment, equipment for the use of ejector seats, test equipment for ejector seats, test equipment for military distresssignalling, components for military distress signalling equipment.

6. P Naval connectors, technology for the use of general naval vessel components, technology for the use of components for aircraft carriers, technology for the use of components for naval auxiliary vessels, technology for the use of components for patrol craft, technology for the use of naval connectors.

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SECTION B: QUESTIONS APPLYING TO SEVERAL LICENCES (QUARTER 2 (2006))

2. Table C in annex D of the Annual Report for 2005 details restrictions that apply to exports to Cyprus which include a prohibition on weapons designed to kill which includes guns. Has the interpretation of these restrictions been modified since Cyprus joined the EU in 2004?

The Policy restriction on Cyprus was dropped on 25 July 2006. Export licences continue to be judged against the EU Consolidated Criteria.

Do the restrictions on the exports to Cyprus include components?

The Policy restriction stated that the Government would grant licences for the export of equipment only to the military forces of either side on the island of Cyprus which the Government is satisfied does not fall within the following categories as defined by the EU common embargo list:

(a) weapons designed to kill and their ammunition;

(b) weapons platforms;

Do they include equipment such as weapon sights which were licensed in the Second Quarterly Report for 2006?

Yes the Policy restriction stated that the Government would grant licences for the export of equipment only to the military forces of either side on the island of Cyprus which the Government is satisfied does not fall within the following categories as defined by the EU common embargo list:

(a) weapons designed to kill and their ammunition;

(b) weapons platforms;

Why given the restrictions on the exports to Cyprus did both the First and Second Quarterly Reports for 2006 include Dealer to Dealer OIELs which appear to permit the export of weapons such as semi -automatic pistols, revolvers, etc. to Cyprus and why does the Second Quarterly Report contain a SIEL covering 10 semi-automatic pistols?

The embargo did not apply to individuals, only the government (Armed forces). As a Dealer to Dealer licence is for the movement of weapons to another dealer, they wouldn't be classed as the government and the embargo would not apply.

3. Details of the three revocations. Is the Government aware, whether UK companies have had to pay compensation because of a breach of a contract?

The Government is considering the data relating to revocations for the period in question and will correspond separately with the Committee on this matter.

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SECTION F: ANNUAL REPORT FOR 2005 AND UPDATES

8. What progress has there been in the following areas since the publication of the Annual Report for 2005:

the Arms Trade Treaty;

On 26 October 2006 the United Nations General Assembly First Committee adopted a resolution to begin a UN based process to take the initiative forward. The resolution was co-authored by he UK, Argentina, Australia, Costa Rica, Finland, Japan and Kenya, and co-sponsored by a total of 115 countries. In a vote it was passed with 139 countries in support, 24 abstaining, and one (the US) voting against. The resolution text and voting details are enclosed. The resolution calls on the UN Secretary General to—

"seek the views of Member States on the feasibility, scope and draft parameters for a comprehensive, legally binding instrument establishing common international standards for the import, export, and transfer of conventional arms, and to submit a report on the subject to the General Assembly at its sixty-second session (2007)," and

"to establish a group of governmental experts, on the basis of equitable geographic distribution, commencing in 2008, informed by the report of the Secretary-General submitted to the sixty-second General Assembly, to examine the feasibility, scope and draft parameters for a comprehensive, legally binding instrument establishing common international standards for the import, export and transfer of conventional arms, and to transmit the report of the group of experts to the General Assembly for consideration at its sixty-third session (2008),"

This is a clear indication of the strong support for the initiative. Those voting in favour included the EU and a wide cross section of countries, notably from Africa, where the negative effects of a poorly regulated arms trade is particularly felt, from Latin America, and from existing and emerging arms manufacturers. But this is only the start of a process. Much more work is needed to turn this beginning into a treaty that enjoys wide support and will make a real difference to the lives of those impacted by irresponsible arms trading.

The Government will now continue to build wider support for the initiative, and we will prepare our views on the "feasibility, scope and draft parameters" to pass to the UN Secretary General in 2007. In developing these views we will want to work closely with stakeholders and would welcome any views from the Committee. We will also encourage other countries to feed in their views to the UN Secretary General.

plutonium disposal;

Since the 2005 Annual report, Russia and the US have signed an Agreement resolving liability protections that would be associated with Pu disposition co-operation and are actively engaged in resolving technical and financial issues necessary for Russian disposition to go forward. The UK has a limited role in progressing Pu disposition in Russia but will be working with the US and other donors to assist both Russia and the US to maintain the momentum in reaching a solution to the technical, financial and other challenges that remain.

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the review of the EU Arms Embargo on China;

The EU Arms Embargo on China remains in place. However, as the Embargo is politically binding, this places the responsibility on Member States individually to define the precise scope of the embargo as they see fit. The UK Government interprets the scope of the embargo as follows: Lethal weapons such as machine guns, large calibre weapons, bombs, torpedoes, rockets and missiles; specially designed components of the above, and ammunition; military aircraft and helicopters, vessels of war, armoured fighting vehicles and other such weapons platforms; any equipment which might be used for internal repression.

The European Council in June 2005 recalled the conclusions of Council in December 2004, which underlined that "the result of any decision should not be an increase of arms exports from EU Member States to China, neither in quantitative nor in qualitative terms". EU leaders also recalled the importance of the criteria of the Code of Conduct on arms exports, in particular criteria regarding human rights, stability and security in the region and the national security of friendly and allied countries. There is at present no consensus within the EU on the issue of embargo lift, and review of the embargo is ongoing within the parameters laid out above.

progress on implementation of the EU's "action plan for the implementation of the basic principles for an EU strategy against proliferation of weapons of mass destruction" of June 2003.

In December 2003 the European Council agreed an EU WMD Strategy which agreed principles derived from the earlier "Action Plan" (June 2003). This Strategy reflected considerable UK input. A progress report for this Strategy has been published bi-annually (June and December), since June 2004.

During 2006 a range of projects and initiatives have been undertaken which demonstrated that the implementation of the EU WMD Strategy remains a high priority for the Union.

Council Joint Actions have been adopted to support the International Atomic Energy Agency (IAEA), the Comprehensive Test Ban Treaty Organisation (CTBTO), the Organisation for the Prohibition of Chemical Weapons (OPCW), and implementation of United Nations Security Council Resolution 1540 and the Biological & Toxin Weapons Convention (BTWC). The Council has also adopted a Common Position (on 20 March 2006) for the BTWC Review Conference, whose purpose is to strengthen the BTWC and to promote the successful outcome of the Sixth Review Conference. A draft concept paper on the EU WMD Monitoring Centre is now being discussed.

9. What were the number of small arms and light weapons destroyed in 2005 and 2006 as a result of programmes supported by the UK Government? What were the main countries of manufacture of these arms and weapons?

2005

Mozambique (Op Rachel): Total of 3000 SALW and 1.66 million SALW ammunition

Albania: 200 tonnes mortar rounds.

2006

Bosnia and Herzegovina—thus far 100,000 destroyed in 2006. This is expected to rise to a maximum figure of 250,000 weapons by April 2007.

Mozambique (Op Rachel)—3,000 weapons and 300,000 rounds SALW ammo, 75,000 SALW magazines.

10. The Committee would be grateful for information on the enforcement of export controls by HM Customs and Revenue, in particular:

the number of prosecutions since January 2006 (description, quantity, value of goods (or technologies) and destination country);

On 23 March 2006 Vestguard UK Ltd was convicted under section 68(1) of the Customs and Excise Management Act 1979 (CEMA) for exporting Body Armour to the value of £128,000 to Kuwait, Iraq and Saudi Arabia. The company was fined £10,000 and ordered to pay £500 costs.

On 6 September 2006 Peace Keeper International Ltd pleaded guilty to 3 offences under section 68(1) of CEMA of exporting body armour and helmets to the value of £23,000 to Kuwait and Iraq during 2004. The company was fined a total of £10,000 and ordered to pay £1,600 costs.

On 7 September 2006 Winchester Procurement Ltd pleaded guilty to 10 offences under section 68(1) of CEMA of exporting military helmets and flak jacket to the value of £48,260 to Kuwait for use in Iraq during throughout the latter half of 2004. The company was fined a total of £8,000 and ordered to pay £500 costs,

the amount and number of compounding penalties since January 2005; and in August 2006 a compound penalty of £5,000, in lieu of prosecution, was paid by a company which had exported military goods to Singapore before the export licence had been issued.

In December 2006 a compound penalty of £15,000, in lieu of prosecution, was paid by a company which had exported carbon materials to various destinations. The company had made a voluntary disclosure to HMRC, following a DTI compliance visit, but HMRC enquiries revealed additional unlicensed exports that had not been accounted for in the disclosure. In addition, restoration fees of £6,945 were imposed in 13 separate cases where we seized goods. It is likely that the figure is higher as cases are dealt with locally and not all records are complete.

the number and details of warning letters issued since January 2005.

Warning Letters on irregularities since January 2005. (Details that could identify HMRC obligations under the particular exporters have been removed to comply with HMRC obligations under the Commissioners for Revenue and Customs Act.)

Irregularity Date of
Warning Letter

1. Export of controlled goods after licence had expired 04/02/2005

2. Exporting military goods after repair under OGEL which did not properly cover them 24/02/2005

3. Unlicensed export of dual-use and military listed goods 25/02/2005

4. Unlicensed export of dual-use goods 10/03/2005

5. Unlicensed export of dual-use goods 11/03/2005

6. Unlicensed export of dual-use goods 14/03/2005

7. Unlicensed export of military listed goods 04/04/2005

8. Unlicensed export of controlled software 13/04/2005

9. Unlicensed export of dual-use goods 11/07/2005

10. Electronic exchange of dual-use technology 08/09/2005

11. Unlicensed export of controlled goods to overseas branch 13/09/2005

12. Unlicensed export of military listed goods 08/12/2005

13. A further 7 warning letters were issued during 2005. Publication of further details may identify the personsconcerned and therefore breach HMRC's duty of confidentiality under the Commissioners for Revenueand Customs Act. 2005

14. Goods believed to be military listed exported fordemonstration to Governments under OGEL.Equipment subsequently rated policy listed, thereforenot covered by the OGEL. All goods returned to UK. 9/01/2006

15. Exports of military listed equipment under OGEL for Demonstration to Governments, without MoD 680 approval 10/01/2006

16. Export of military component. Exporter unable to comply with full terms of OGEL use (Military Components) 13/01/2006

17. Military listed goods exported after the OIEL had expired, or not covered by the OIEL 26/01/2006

18. Unlicensed shipment of dual use goods 15/02/2006

19. Two exports of military goods to overseas Governments covered by OIEL but sent via countries not included in the OIEL 17/02/2006

20. Military goods exported under OGEL (Export for Exhibitions: Military Goods) without prior MoD permission 24/02/2006

21. Unlicensed export of dual-use goods 15/03/2006

22. Controlled goods exported under OGEL—consignee country covered but end use country not covered 23/03/2006

23. Military listed goods exported to non-Government customers under Government-wide OIEL (OIEL since extended); failure to obtain F680 approval 30/03/2006

24. Unlicensed export of dual-use goods previously rated no license required 30/03/2006

25. Failure to declare licence for military listed goods 03/04/2006

26. Unlicensed export of military listed goods 10/04/2006

27. Unlicensed export of military listed goods 20/04/2006

28. Unlicensed export of controlled goods 27/04/2006

29. Exports of military goods under OGEL that did not provide full cover 12/05/2006

30. Unlicensed export of dual-use goods 23/05/2006

31. Export of military listed goods to consignees not named on company's OIEL 02/06/2006

32. Unlicensed exports of military listed goods 21/06/2006

33. Unlicensed export of military export goods 22/06/2006

34. Failure to reference export licence details on letter of authority accompanying temporary exports of military listed software. Temporary exports of military listed software for personal use incorrectly exported under Access Overseas OGEL. Incorrect use of OGEL for demonstration to governments. 03/07/2006

35. Military vehicle parts sold ex-works using company OIEL 16/08/2006

36. Export of dual-use goods without declaring that they were being exported under the Community General Export Authorisation 12/09/2006

37. Exporting a military listed item prior to license being approved 12/09/2006

38. Military listed goods sent to UN under OIEL without prior permission form DTI 12/09/2006

39. Goods dispatched under OGEL (Military Goods: Government or NATO End Use). Country of consignment was listed on OGEL but not country of end-use. 14/09/2006

40. OGEL (Military Goods: Government or NATO end-use) used for export to private company. 19/09/2006

41. Dual-use goods exported under OGEL which did not cover them 02/10/2006

In addition to the above, HMRC disrupted procurement attempts by preventing the supply on 34 occasions between 1 April 2005 and 31 March 2006 and 15 such attempts between 1 April 2006 and 30 September 2006.

11. On page 5 of the Annual Report it is stated that one of the guiding principles of the Export Licensing Community is to "establish a dialogue with exporters". It would assist the Committees to have a note explaining how this dialogue takes place and, in broad terms, the matters discussed and decisions taken?

As well as on specific export licence applications and compliance and awareness activities, the Government engages with its stakeholders in numerous ways. In broad terms, the four principal departments making up the ELC liaise with exporters through meetings—both formal and informal—and correspondence. As an example of formal meetings, the DTI's ECO chairs the "Export Control Advisory Committee" (attended by representatives of defence exporter trade associations and academia) and attends the "Export Group for Aerospace and Defence" ("EGAD", comprising individual exporting companies) in both cases to listen to and respond on exporters' concerns and any issues they wish to raise.

By way of example, ECO is working increasingly closely with EGAD on a number of initiatives designed to improve awareness. The EGAD website is now linked directly to key documents on ECO's website to assist exporters; industry assists in the promotion of the ECO Checker Tools by demonstrating them at industry gatherings; front line industry staff will be closely involved in testing new IT systems; and EGAD and ECO are committed to working together to produce a basic export control awareness brochure.

Informally, feedback is also received through awareness seminars run by the Government. Both have been very successful. Matters discussed are often wide ranging, covering the controls themselves and their interpretation.

12. What are the criteria for referring licences to the Department for International Development for advice and what proportion of applications are sent to Department for International Development. The Committees note, for example, from the Second Quarterly Report that five OIELs were issued for exports to Botswana, and requests the assessments which the Government has made to meet the requirements of section 3 of the Best Practices for the interpretation of Criterion 8 (pages 83-85 of the Annual Report for 2005).

The Department for International Development (DFID) is the lead department for advice on sustainable development considerations as defined in Criterion 8 of the Consolidated Criteria. Licences are referred to DFID by DTI for an assessment against Criterion 8 when the destination is on a list of countries where sustainable development is most likely to be an issue, and (for SIELs and SITCLs) the value of the licence is above a certain threshold, determined on a country by country basis. The destination list is made up of those countries which are eligible for concessional loans from the World Bank's International Development Association (IDA), taken to represent the world's poorest. This list is kept under constant review to take account of changing circumstances.

In addition, any export licence application may, at the request of any Government Department involved in the licensing process, be examined for its impact on the economy or sustainable development of the recipient country. DfID can also request to see licence applications for other countries which are of interest in relation to other criteria.

The proportion of licences sent to DfID for advice during any particular period depends on the mix of country destinations for which applications are made. During 2005, 1.6% of SIEL applications and 35% of OIEL applications were referred to DfID for advice.

The Committee highlights five OIELs issued for exports to Botswana during the second quarter of 2006. Botswana is not an IDA-eligible country, and consequently an assessment against Crtierion 8 was not requested from DfID for these licences.

13. The best practice guidance for the Interpretation of Criterion states that "Member States are encouraged to exchange information regarding countries of concern on a case-by-case basis through the co-operation in COARM, or by other channels". It would assist the Committee to have a note of the arrangements which are currently in place for the exchange of information.

All members states will consult other Partners if they are considering an application which has been denied by the other member state. This is done by the coreu intra-EU telegramme network. A member state will send a coreu to the country in question asking for additional information (specifically whether the applications can be considered as essentially identical) about the licence refused and whether the reasons for refusal are still valid. This is available for the wider community to see. The response will also be sent back via coreu so all Member States have access to the response.

As well as this consultation process, there are regular COARM meetings where information is exchanged on countries or exports of concern.

14. Please list the cases where the UK's refusal to issue an export licence has been the subject of a notification from another EU state that it proposes to grant a licence? Were there any cases in 2005 or 2006 where an EU state has granted a licence without notifying the UK under the EU Code?

EU Member States are obligated to consult Partners on licences where it has previously refused a licence. The initial consultation mechanism under the Code of Conduct takes place via coreu. Member States will then respond to the consultation, and notify the Member State if it wishes to undercut. To date, we are not aware that there have been any clear indications of an outright undercut.

15. How many OIELs with terms of five years of longer were issued in 2005 and 2006?

The Government is considering the data relating to the terms of OIELs issued over the period in question and will correspond separately with the Committee on this matter.

16. At paragraph 4.2 of the Annual Report the Government states that it "continues to explore opportunities to extend the data available on defence exports". What opportunities have been identified?

There is a cross departmental Defence Trade Statistics Working Group (DTSWG) which brings together the relevant experts from the statistics and data collection areas (HMRC, MoD) and policy fields (MoD, DfID, FCO and DTI) which was established to address the significant and quite longstanding difficulties associated with the production of robust defence export statistics. Some of these difficulties were highlighted in the report produced by MoD economists and university academics in November 2001 entitled "The Economic Costs and Benefits of UK Defence Exports". The work of the DTSWG has been further challenged by the current drive to reduce the data collection burden on business and on Government resources. The Working Group continues to try to improve the robustness of current defence trade data, but to date has not found it possible to extend the coverage of the data.

17. On page 64 of the Annual Report for 2005 the Government states that "in reaching decisions on [applications for SIELs for spares for countries that have intervened in the DRC] the Government will take into account the wider implications of forcing UK companies to break existing obligations." The Committee would be grateful for a note setting out the applications to which these considerations applied. In how many cases did the Government attach weight to this consideration before issuing an export licence? Is the Government aware of any cases where UK companies have been forced to pay compensation because of a breach of a contract?

Where a company applying for a licence makes clear that a refusal would force them to break an existing obligation this will be taken into account. However the decision whether to approve or refuse the application will be based on consideration of the Consolidated EU and National Arms Export Licensing Criteria, If an application fails to meet the Criteria it will be refused, even if a company has pointed to potential contractual difficulties should such a decision be taken. We do not however keep records of the number of cases where companies have pointed out such concerns when applying for a license. The Government is not aware of any cases where an exporter has been forced to a compensation for breach of contract.

18. Table C in annex D of the Annual Report for 2005 details considerations that apply to exports to Taiwan. It is noted that the value of SIELs granted was £5 million and that they included components for aerial target equipment, components for ballistic test equipment, components for equipment for the use of aerial target equipment, components for military aero-engines, components for military communications equipment, components for military infrared/thermal imaging equipment, components for nuclear radiation detection equipment, components for semi-automatic pistols, components for submarines and components for unmanned air vehicles. What assessment of the impact of these exports on regional stability did the Government make?

Exports of licensable defence-related equipment and technology to Taiwan are considered on a case by case basis. In scrutinising licence applications, particular weight is given to the implications for regional stability. In these cases to which you refer HMG assessed that the goods did not provide Taiwan with an enhancement of capability significant enough to destabilise the current balance of power in the Taiwan Strait.

19. To what items would the restriction set out at table E in annex D in respect of Argentina apply?

All applications for licences to export goods to Argentina are judged on a case-by-case basis against the Consolidated EU and National Export Licensing Criteria. Licences will only be granted for exports that we are satisfied would not now or in the foreseeable future, put at risk the security of our Overseas Territories in the South Atlantic or our forces operating there.

20. In how many cases in 2005 did the weight which the Government attached to the Other Factors on page 72 of the Annual Report outweigh the eight criteria?

None. Other Factors can swing the decision in finely balanced cases, but do not outweigh or affect the application of the Criteria.

21. Please supply the Committee with a short summary explaining the structure of the Export Control Organisation, how it operates and setting out its target for 2006-07.

TASKS

ECO's core functions are:

— processing export licence applications made under the Export Control Act 2002, rating requests, and Customs pagers requests;

— maintaining the domestic legislative framework including Open General Export Licences (OGELs);

— participating in export control policy-making in the UK and in international fora, eg the international regimes and the EU;

— carrying out exporter awareness and compliance functions;

— participating in HMG's counter-proliferation machinery;

— contributing to international outreach programmes;

— maintaining the export licence denials database;

— compiling data for the Annual and Quarterly Reports;

— responding to Quadripartite Committee questions;

— responding to other Parliamentary and media inquiries; and

— maintaining its databases and website.

OBJECTIVES

ECO's key objectives are to run the export licensing regime effectively (i.e. licensing decisions accurately reflect Government policy, exporters are aware and compliant) and efficiently (applications are processed promptly, good information available to users). This twin aim of promoting export control policy objectives and providing a good service to exporters is reflected in the broader Government export licensing community Mission Statement "promoting global security through strategic export controls, facilitating responsible exports".

STRATEGY

DTI's overall vision is "creating the conditions for business success and helping the UK respond to the challenge of globalisation". ECO contributes to this in the following ways:

— providing a prompt and reliable service to exporters;

— promoting global security to create the conditions for global economic prosperity which is in the interests of UK plc;

— providing an effective domestic and international regulatory framework for strategic exports will promote confidence in the legitimacy of defence and dual-use exports, which is in the UK's commercial interest;

— providing a secure control regime in the UK will make it easer for UK suppliers to obtain the sensitive foreign technologies they need; and

— collaboration with overseas export licensing authorities eg through the EU and the Framework Agreement, will facilitate multinational commercial projects, thus helping the UK respond to the challenge of globalisation.

More specifically, ECO's recent strategy has been to promote efficiency through joined-up working with other Government departments (OGDs) via the "Jewel" project and a closer relationship with exporter representatives; and to make the framework of controls as effective and transparent as possible through the changes introduced by the Export Control Act. The strategy has been successful in delivering improved performance against efficiency targets (exceeded in 2003, 2004 and 2005 and on target in 2006), together with a continuing high level of effectiveness (no serious mistakes and an extended scope of control).

In addition to improving the quality of its outputs, ECO has also been focusing on its inputs, in order to maximise efficiency. Its strategy for improving efficiency is to:

— streamline business processes wherever possible (consistent with risk);

— to improve the skills and deployability of its staff through enhanced training;

— to improve the quality of applications from exporters and to reduce nugatory inquiries by providing better guidance and training for exporters;

— to improve information management within ECO so as to be able to better identify and target exporters in need of assistance and tailor licence products to suit exporters' needs; and

— to understand better the factors affecting performance so we can deploy resources accordingly and ensure we are not duplicating effort.

TARGETS

ECO has a range of performance targets. These are incorporated into the DTI Business Plan, specifically into business plan objective 12, on Nuclear Security and Safety and the effective and efficient DTI contribution to preventing the proliferation of arms and other strategic goods. ECO owns the first sub-objective, which is to process export licence applications promptly and accurately and improve the service offered to exporters. To achieve this, ECO works to the following published targets:

(a) Timeliness: performance against the following key targets:

— HMG to process 70% of Standard Individual Export Licence (SIEL) applications in 20 days, and 95% in 60 days;

— HMG to process 60% of Open Individual Export Licence (OIEL) applications in 60 days;

— DTI to respond to 90% of ratings requests within 10 days for non-circulated requests and 20 days for circulated ones;

— HMG to complete 60% of appeals within 20 days and 95% within 60 days;

— Long outstanding cases not to exceed 30>3 months old, 6 >6 months and 1>9 months, measured as average per month over the quarter.

(b) Accuracy:

— (Category One) No incorrect licensing or rating decision having consequences which materially breach the Consolidated Criteria (eg contribute to Weapons of Mass Destruction (WMD) programme, increase regional conflict) or our international commitments;

— (Category Two) An error rate of not more that 0.5% in processing licences or ratings which lead to incomplete analysis of a case prior to a decision being reached or which degrade our reputation or cause political embarrassment, while not leading to a material breach of the Consolidated Criteria.

Targets for future years have not yet been fixed but are not expected to change substantially.

22. Please supply the Committee with a table setting out for the Export Control Organisation for 2005-06 and 2006-07:

the number of staff in post (full time equivalents)

Date	Staff in post
As at 1 April 2005	115
As at 1 April 2006	101
Projected 1 April 2007	102

We continue to monitor resourcing of the ECO's operations to ensure that we can continue both to meet our performance targets and resource other areas of work appropriately. ECO is still analyzing the potential for additional efficiencies from its current IT and business change project "SPIRE".

the number of casual/temporary staff

Date	Temporary staff/contractors
As at 1 April 2005	16
As at 1 April 2006	8
Projected 1 April 2007	0

the number of compliance checks, including visits to companies, carried out with the percentage of companies that were fully compliant.

Year	Number of Compliance Visits	Percentage of companies found to be fully compliant
2005	533	69%
2005 (to end Sept)*	421	69%
2006 (to end Sept)	378	63%
* additional figures for "2005 to end September" to enable comparison with the 2006 figures.

By way of commentary, please note firstly that during the latter half of 2005, DTI ECO's Compliance Unit was two compliance officers short due to long-term illness (five months) and a vacancy. The vacancy was filled in April 2006, but the new Compliance Officer has only recently begun visiting companies after completion of his training.

Over the last 12 months or so, ECO's Compliance Unit has been specifically targeting OGEL users, the largest increase in its client base as sub-contractors to larger companies are being asked to export in their own right for the first time. The statistics therefore include an unusually high proportion of first time visits. Many of the instances of non-compliance have been technical breaches of licence condition, for example missing or incorrect undertakings or other supporting paperwork or licences incorrectly referenced on invoices. Experience in the past has been that where such breaches occur a revisit within three to six months has usually found the company has improved its processes dramatically and is now compliant.

We have also, more recently taken a more robust approach to compliance in conjunction with making more help available to exporters. For example we have run seminars specifically on Compliance and published "Compliance Visits Explained" on our website (http://www.dti.gov.uk/europeandtrade/strategic-export-control/help-advice/page33802.html). The latter acts as a companion to the Compliance Manual.

HMRC have also tightened up on minor breaches. Examples of fines levied can be found on the ECO website (http://www.dti.gov.uk/europeandtrade/strategic-export-control/licensing-rating/guidance/page 33980.html)

shows the latest, two companies were fined £10,000 and £8,000 respectively plus costs for exporting body armour and helmets without the appropriate licenses. We are also starting to look, with HMRS, at additional measures to those already available around the issue of enforcement.

the number of licences received and processed, broken down into type of licence (SIEL, OIEL, etc)

Year	Number of applications recieved	SIELs	OIELs	SITCLs	OITCLs
Technical Assistance
2005 (full year)	9,157	621	144	40	11
2005 (to end Sept)*	6,942	497	96	31	10
2006 (to end Sept)	7,178	459	78	42	4

Year	Number of applications recieved	SIELs	OIELs	SITCLs	OITCLs
Technical Assistance
2005 (full year)	9,055	669	136	47	10
2005 (to end Sept)*	7,529	510	72	20	8
2006 (to end Sept)	7,533	489	88	48	3
* additional "2005 to end September" figures to enable comparison with 2006 figures.

The tables show that more licences have been processed than were received. This is due to (i) ECO efforts to clear backlogs of long outstanding cases and (ii) cases carried over from the previous year.

23. Has the Export Control Organisation a business plan for the next two to three years? If it does, please supply a copy?

DTI ECO is currently revising its business plan and will supply the new version as soon as possible. In the interim, please refer to the ECO business plan given to the Quad at the end of 2005, ahead of the oral evidence session of Malcolm Wicks MP, DTI Minister responsible for export controls.

24. What IT projects have been completed in 2006-07and what projects are currently underway or planned? What were the planned costs of the projects completed and what were their outturn costs? What savings were/are anticipated by the projects and what have been achieved?

ECO has carried out/is carrying out the following IT projects in support of existing XNP IT Systems. DTI currently employs two IT contractors to maintain these in-house IT systems. It is estimated that around £100,000 will be spent IT contractors in support of ECO for the financial year 2006-07.

SPIRE

Work is well advanced on an IT-enabled business change project known as SPIRE (Shared Primary Information Resource Environment). SPIRE will automate the export licensing system, from the completion of licence applications using newly created web-based application forms, through the DTI and OGD (Other Government Departments) business processes, and the issue of an electronic licence to HM Revenue & Customs.

Work started on Phase 1 on 10 July 2006 and was completed in early November 2006. This included a Proof of Concept to deliver the on-line export licence application forms that form the exporter's touch point with SPIRE. An OGC Gateway Review validated the project in July 2006. Preparation for the later phases of SPIRE, including costing and planning activities, has also been completed.

Phase 1 was run using PRINCE2 project management methodology and was delivered on time and within budget. Roll out of the full system, following the recent agreement by the SPIRE Programme Board to move into the next phase, will be September 2007. This will include providing licence applications and supporting documents electronically to the front door of the FCO, MOD and DfID and receiving advice back from them directly into SPIRE. HMRC will receive export licenses electronically directly into their CHIEF system. SPIRE functionality will provide the ability to fully integrate with the FCO, MOD, DfID and we will be discussing the possibilities, and the sharing of associated support costs, with them during the next phase of SPIRE.

***OTHER IT PROJECTS

Two exporter "self-help" tools have been completed this year and are now available on the internet. The first one is called "Goods Checker" and enables an exporter to identify whether his goods are subject to control, and in which category of the Control Lists. A second tool called "OGEL Checker" identifies the appropriate Open General Export Licence (OGELs) for any given export if the rating and the destination country are input.

These projects were planned as part of a drive to reduce nugatory inquiries by providing better guidance and training for exporters. Total development costs were £96,000 and £64,000 respectively. It is difficult to quantify any savings at this time as associated training courses to enable exporters to make full use of these tools are only just being launched.

25. What outreach to industry and overseas has been carried out since January 2006?

The ECO arranges on average four seminars or awareness events a month for exporters at various locations in the UK. These include beginners, intermediate and advanced seminars and a workshop to help exporters to apply for licences over the internet. Customised seminars are also given, or presentations made, to a range of companies, trade organizations and groups, on request.

During 2006 two software tools have been made available on the Internet to help exporters (see table above). The first one is called "Goods Checker" which enables exporters to identify whether goods are subject to control, and by which entry in the Control Lists. The second tool is called "OGEL Checker" which helps exporters to identify appropriate Open General Export Licences that may by available for any given export and takes the user through all of the conditions on the licence that must be compiled with if it is to be used. A new workshop has been developed to help exporters with control list classification and use of the Checker Tools. In response to previous comments from industry one version of the workshops focuses on military goods and another on dual-use goods.

The ECO website contains comprehensive information about the UK's strategic export control regime. When new Notices to Exporters or the Export Control Bulletin are posted on the website they are also e-mailed to anyone who has registered to receive information electronically. Some of this information is also further disseminated by other organisations eg by Trade Alerts, the Defence Manufacturers Association Newsletter and the Export Control Association (Ernst Young) News Bulletins.

Compliance officers will also ensure companies are fully aware of UK export controls during their visits, helping companies to increase their knowledge.

ECO supports some international outreach activities set up by the FCO, the EU and the United States. Exports have participated in outward visits made by UK delegations eg to Bulgaria earlier in the year. Representatives from ECO have been invited to speak at a number of international conferences including in Berlin, Brussels, Seoul and Tokyo. The UK has been active in support of the EU-funded outreach project in China and a UK team formed part of the EU delegation to Beijing in June to plan a series of seminars and workshops in China and in London for Chinese export control and enforcement officials. Experts have participated in US funded outreach with countries such as Bosnia & Herzegovina and in particular two week long workshops for officials from Pakistan that were held at a hotel in London. ECO routinely hosts inward visits by officials from other countries, this year including from Australia, Japan (several), New Zealand, Sweden and Turkey.

SECTION H: OTHER MATTERS

26. The Review conference of the UNPoA to Prevent, Combat and Eradicate the Illicit Trade in Small Arms Light Weapons in June and July 2006 is reported to have failed—for example see the Observer, 9 July 2006, "UN arms control conference ends in disarray". What assessment did the Government make of the conference?

It was disappointing that the Review Conference of the UN Programme of Action (UNPoA) to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons (SALW) in All Its Aspects (held in New York between 26 June and 7 July) failed to agree an outcome document covering follow-up action. However, the UK was able to use the presence of all the UNPoA member states, nongovernmental organisations and other international bodies to build support for the key UK objectives of common international standards for SALW transfer controls and addressing SALW proliferation and armed violence from a developmental perspective. As the Chair of RevCon, Ambassador Prasad Kariyawasam said in his post conference address "the UNPoA remains an enabling framework" and "its validity and effectiveness remain undiminished". The UK remains committed to working within the UNPoA with all interested parties towards strengthening the UNPoA and its implementation ahead of the next Biennial Meeting of States in 2008.

27. On 19 September 2006 a military coup took place in Thailand. Has the coup resulted in any change of policy on strategic exports to Thailand? Have any licences been revoked?

We judge each export licence application on a case by case basis against the Consolidated EU and National Arms Export Licensing Criteria. This continues to apply to Thailand. We are closely monitoring the situation in Thailand, including the respect afforded to human rights. To date, no licences have been revoked.

28. In an article published on 24 September 2006 the Observer states that DESO has identified Iraq, Libya, Colombia and Kazakhstan as "priority" markets. What assessment did DESO make of the treatment of, and respect for, human rights in these countries before promoting them as priority markets?

A country will only be considered for DESO's Key Markets list if its inclusion is entirely consistent with the Government's foreign and security policy. The Committee will be aware that there is an exemption to the UN Arms Embargo on Iraq for supply to the Iraqi Government and Multi-National Force, and that it is the UK's policy to assist the Iraqi Government to build a stable, secure and democratic country. Given that the UK has the capability to meet some of Iraq's needs to build up its forces' capacity, the listing of Iraq as a Key Market reflects both consideration of Government policy towards assisting Iraq and commercial considerations.

The other countries to which the question refers, as the Committee will be aware, are not subject to embargoes. The identification of these as Key Markets reflects an assessment that these countries have needs which UK Industry is capable of meeting with equipment. The supply of such equipment would have to be consistent with the Consolidated EU and National Arms Export Licensing Criteria. However, the Key Markets list is not limited only to countries to which it is possible to export the full range of military goods. It may include countries, such as Libya, which have recently ceased to be subject to an embargo, where this is consistent with wide Government policy, as well as commercial considerations.

December 2006