4 The Performance of the Export Control
Organisation
24. The Export Control Organisation (ECO), which
is based within BIS, is responsible for "assessing and issuing
(or refusing) export licences for a wide range of controlled so-called
"strategic" goods. These include military and dual-use
items."[36] There
are two main types of export licences: Standard Individual Export
Licences (SIELs) and Open General Export Licences (OGELs). SIELs
allow shipments of specified goods to a specified consignee up
to the quantity specified by the licensee. OGELs are blanket approvals
for certain goods which are intended to reduce administrative
burdens on subsequent shipments. OGELS "allow the export
of specified controlled goods by any exporter. They remove the
need for exporters to apply for an individual licence, providing
the shipment and destinations are eligible and the conditions
are met."[37]
25. In written evidence to us, EGAD highlighted delays
in processing of export licence applications by the ECO. They
complained that the poor performance of the ECO had led to contractual
penalty clauses being enforced against UK companies and, "the
situation does appear to be getting worse and is affecting the
reputation of companies within the UK".[38]
EGAD considered that the ECO was "understaffed and overworked;"[39]
and that it was receiving far more licence applications than it
had capacity to process. Some 17,000 licence applications were
expected for 2010 by the ECO, compared with some 15,000 that were
processed in 2009.[40]
According to EGAD, the ECO was resourced to process between 9,000
and 10,000 Standard Individual Export Licence (SIEL) applications
per year.[41]
26. We asked EGAD to elaborate on their concerns
about the performance of the ECO. They told us that the ECO faced
problems with their workload for two main reasons. First, there
was greater awareness amongst firms, especially those selling
dual-use items,[42] which
are more likely to be dual-use than arms, of the need to apply
for an export licence. Second, the new generation of open general
export licences had been made "incredibly complicated"
and instead of reducing administrative burdens, had increased
the bureaucratic workload for firms.[43]
As a result, instead of applying for the open licences, firms
were applying for separate individual export licences, partly
to avoid the complexity of the OGEL application process.[44]
27. EGAD noted that "it will be difficult to
have an export-led recovery if the licensable element of that
recovery is hampered by the fact that companies cannot obtain
licences in a timely and efficient manner."[45]
They were therefore pleased that the "forthcoming review
of the open general licensing system will probably have the effect
of reducing the number of individual licences" and hence,
the workload for companies and the ECO. It was hoped that the
process for applying for an OGEL would be simplified with less
exceptions and caveats. EGAD requested that the Government produce
a "model undertaking" that would clarify what compliance
officers would accept as meeting the requirements of the licence.[46]
28. EGAD highlighted more general grievances with
the work of the ECO. Mr Fletcher commented that the ECO was "putting
obstacles in the way of UK exports."[47]
It was suggested that the ECO was applying regulations to goods,
which were not intended to be covered by the various agreements
and regulations;[48]
and that export regulations were being applied too liberally to
"dual-use" goods such as laptops, modems and routers,
which was "not the intention" of the negotiated export
controls.[49]
29. BIS told us that it was aware of the increase
in the number of licence applications, but, while there was "room
for improvement" it was confident that the ECO performed
well. The Head of ECO, Mr Tom Smith, told us that:
I've looked at our main competitor systems—for
example, in the USA, France and Germany. Our customers tell us
that we compare very well; ... I think we're a world leader.[50]
He conceded that the average time for processing
applications had increased from "about 13 days to 19 days",
but he disagreed with EGAD's figures that the ECO was resourced
to handle only between 9,000 and 10,000 applications.[51]
He said that overall the ECO "coped very well" and went
on to dispute many of the complaints levelled by EGAD against
the OGEL system.[52]
While he agreed that there were problems around the "complexity
and ease of use" he felt that the new open general licence
was, on balance, "very successful".[53]
He also confirmed that the review of the OGEL system would include
a rewriting in plain English of the licence application and the
use of more standardised conditions of compliance. His overall
assessment was that the system was "quite impressive".[54]
30. We asked whether there were plans to introduce
charging for licences: EGAD had asked for a "statement that
they [the Government] have no intention of charging for export
licences. That would be a great help to the industry, which is
extremely worried about the rumours that there may be charges
for licences."[55]
The BIS Minister, Mr Mark Prisk, would not give an assurance that
charges for licences would not be introduced. Instead he said
that:
It is not the intention of the Government to
do anything that would be any more than seeking to look at the
possibility of charges for the costs of the service. This is not
intended to be some sort of back-door charge over and above that,
and we would want to consult industry. We must look at the balance
of these issues to see whether, in fact, there is a different
finance model which would make more sense.[56]
31. We conclude that a well-functioning licence
application system is vital to the promotion of arms exports and
that the system should impose the least possible administrative
burden on exporters, consistent with an effective control regime.
We further conclude that it is a matter of concern that a prominent
industry representative body, such as the Export Group on Aerospace
and Defence (EGAD), has such a low opinion of the performance
of the Export Control Organisation (ECO). We recommend the Government
reviews the performance of the ECO and provide us with the results
of this Review in its response to this Report. We further recommend
that the Government reports to us the results of its review into
the workings of the Open General Export License system.
36 ECO Website: http://www.bis.gov.uk/exportcontrol Back
37
Department of Business Innovation and Skills, "Introduction
to the Export Control Organisation and to Export Controls",
March 2010 http://www.bis.gov.uk/assets/biscore/eco/docs/intro-to-eco.pdf Back
38
Ev 40 Back
39
Q 38 Back
40
Ev 40 Back
41
Ev 40 Back
42
Dual-Use items are goods, software or technology (documents, diagrams
etc) which can be used for both civil and military applications.
See www.businesslink.gov.uk and also Council Regulation (EC) No
428/2009. Back
43
Q 34 Back
44
Q 34 Back
45
Q 39 Back
46
Q 37-Q 38 Back
47
Q 42 Back
48
Q 42 Back
49
Q 41-Q 42 Back
50
Q 75 Back
51
Q 76 Back
52
Q 76-Q 78 Back
53
Q 76 Back
54
Q 78 Back
55
Q 63 Back
56
Q 77 Back
|
