Committees on Arms ExportsWritten evidence from the Export Group for Aerospace and Defence (EGAD)
RE: NEW INQUIRY BY THE COMMITTEES ON ARMS EXPORT CONTROLS INTO STRATEGIC EXPORT CONTROLS
In response to the Committee’s request of 8 September 2011 for evidence to its new inquiry for its consideration, we would submit the following comments, in summary:
Charging—we welcome the UK Government’s reported intention to reconsider this proposal;
Current Status of UK Export Controls—we are still receiving numerous complaints from companies about delays in the processing of licence applications;
UK Export Control Policy Review—we are concerned that we have not been consulted on this policy review by the FCO;
UK Export Control System Review—we stand ready to provide input into the ECO on a possible systemic review (separate to the above FCO Policy review) aimed at making the UK’s export control system more efficient;
Technical Assistance—we are concerned at proposals coming out of the EU to introduce controls in this area;
Intra-Community Transfers—we are concerned that progress on the EU’s intra-community transfers directive has not been as smooth as it should have been;
UK/US Defense Trade Cooperation Treaty—we are reassured that the UK MoD is approaching implementation of the Treaty in a mature and carefully-considered way;
US Proposals on Dual and Third Country Nationals—we believe that this issue has now been effectively dealt with in a way which has clearly demonstrated the wisdom and benefit of constructive engagement between the Government and Industry on an issue of common concern;
US Export Control Reform—we are extremely supportive of the export control reform proposals which have been coming out of the USA;
Anglo-French Treaty—we are constructively engaging with our French counterparts and our respective Governments to identify potential solutions which would make bilateral defence trade between the UK and France as easy as possible;
Arms Trade Treaty—we continue to remain engaged, as the negotiations leading towards the framing and adoption of an effective ATT are reaching a conclusion;
“Red Tape Challenge”—this has been a useful initiative, which has merely served to emphasise the extent of the UK’s national limitations, when so much relevant new legislation has been coming out of the EU;
Awareness of ITAR—we have been “interested” in hearing about some recent pronouncements which have been emerging from the UK MoD, which have merely served to reveal in sharp focus the degree of confusion that exists there on ITAR issues.
More detailed comments on the above issues are as follows:
Introduction
The Export Group for Aerospace & Defence (EGAD) is a UK-based not-for-profit making special interest industry group, founded in September 2004, focusing exclusively on all aspects of export and trade control matters. EGAD is the only dedicated national industrial body in the UK dealing exclusively with export control issues. EGAD operates under the joint auspices of ADS Group Ltd, the British Naval Equipment Association (BNEA), INTELLECT and the Society of Maritime Industries (SMI).
A dedicated website (www.egad.org.uk) has been created at the request of the group’s Executive Committee and with guidance from its Awareness Outreach Activities Sub-Committee, that is intended to become the first port of call for companies as the source of user-friendly basic, initial guidance on all aspects of export and trade controls, created by like-minded people to help compliance staff within companies. It seeks to identify potential sources of help, and ideas for problem solving, and presents easy steps to “bite-sized compliance”.
The website has been kept simple, and, in addition to providing information on EGAD, itself, seeks to present a practical and simple step-by-step guide on understanding export and trade controls, and addressing the fundamental questions which companies ask: when do I need an export licence and how do I go about trying to obtain and use one?
EGAD has also created, with Cranfield University, a series of externally-accredited training courses in export control compliance, at four levels, running from very basic awareness (appropriate for all company staff) up to a Master’s equivalent course (for senior export control compliance managers within companies). For further information, details on these are available at: www.strategicexportcontrols.org/index.cfm.
EGAD welcomes this opportunity to contribute to the open consultation around Strategic Export Controls; CAEC invited comment on several specific areas, the response of EGAD to those areas, is detailed below:
1. Charging
1.1. We welcome the fact that the UK Government is apparently re-considering its previous proposals to introduce a charging system for the submission of export and trade control licence applications from April 2012. We believe that this decision is the correct one for the Government to have taken, given the serious impact that the introduction of such a charge would have had on UK exports of strategic goods (ie not just exports from the UK Defence Industry), especially those of small and medium-sized enterprises (SMEs) in the current, highly challenging global economic climate.
1.2. However, we realise that this proposal is not going away (as this is at least the third time that it has been raised since the 1996 Green Paper). UK Industry would welcome the opportunity to work with Government to formulate proposals that address effectively the issue of funding for those UK Government departments most heavily involved in the export controls process, so that a truly effective and administratively efficient system can be formulated which may achieve this.
2. Current Status of UK Export Controls
2.1. Whilst it is perceived that the current export control system, and especially the turnaround of licence applications, has recovered to a certain extent over the past year, we are concerned that this minor improvement has been due to efforts by the Export Control Organisation (ECO) and its advisory departments to put additional effort and resources into the processing of Standard Individual Export Licence (SIEL) applications. This has been at the expense of some other aspects of the wider UK export control system (especially the demise of the “Rating” system earlier this year, and the detriment of the Open Individual Export Licensing—or OIEL—system).
2.2. Also, some of the new Open General Export Licences (OGELs) which have been issued have proven to be so unfathomable to interpret as to dissuade even expert export control practitioners from registering for them.
3. UK Export Control Policy Review
3.1. To date we are unaware of any consultations, informal or formal, which have been related to the announced Foreign & Commonwealth Office Review of the UK’s Defence Export Policy, which is reported to have been being taking place since early-2011.
3.2. We would, naturally, be keen to have had some input to this review, and would have stood ready to assist in it, but, at present, are awaiting some formal announcement from the FCO.
4. UK Export Control System Review
4.1 There are, two aspects to the UK’s Export Control System: 1) the policy side focuses on what UK companies should be permitted to sell to whom around the World, which is the predominant focus of attention for the Non-Governmental Organisations, the media, the public and many UK politicians, and 2) there is the systems and procedures side, which deals with when a company (or individual) needs an export or trade control licence and how they should go about trying to obtain and use one, which is the predominant focus for most people in UK Industry. Therefore, we believe that there would be as strong an interest in any potential review of how the UK’s export control system operates from those in Industry whose commercial activities are governed by it, as there would be in the overall policy, itself.
4.2 We believe that there is enormous scope for the further review of the UK’s export control system to be undertaken, in order to alleviate much of its current burden; the numbers of licence refusals have remained extremely small (at c.1%, or so) , and we are certain that there must be a large swathe of current SIELs which could be safely and responsibly removed from the scope of the current SIEL system, and placed within the ambit of the OGEL or OIEL systems, instead. As the workload on the ECO and its advisory departments has risen, the need for such a review has become increasingly pressing.
4.3 We must emphasise that we are not seeking the movement of SIEL cases where there is the remotest doubt, based on past experience, that a licence would be issued by Government, but merely the movement of those cases where a licence will inevitably be granted.
5. Technical Assistance
5.1. The new proposals from the European Commission to introduce some form of technical assistance controls across Europe, as part of the “Intra-Community Transfers Directive” are causing concern. At present UK Defence Companies are not subject to such controls, although we understand that a number of our European partners are.
5.2. We would urge the UK Government to oppose the introduction of such controls, and, if these efforts were to fail, that they must ensure that the parameters of these new controls, and the definitions that they use must be as clear and simple as possible.
6. Intra-Community Transfers
6.1. We are disappointed that progress towards the adoption of the new ICT arrangements has been as slow as it has been, and remain convinced that it could have been achieved faster than has turned out to be the case.
6.2. The considerable potential benefits that the ICT presents in significantly reduced nugatory bureaucracy for companies across the EU, and, thus, for speeding up the European supply chains for UK firms, mean that UK Industry supports the aim behind this initiative, if not the current status with its delivery.
7. UK/US Defense Trade Cooperation Treaty
7.1 We have been engaged with the UK MoD on discussions about how best to test the implementation of the Treaty, and have put forward a number of UK companies who may be prepared to undertake “Pathfinder” testing of the Treaty, and its implementation, as well as providing fora at which speakers from the UK Government (and especially the UK MoD) can brief representatives of UK Industry on the latest developments.
7.2 We are hopeful that the “Pathfinders” will be successfully concluded, and that, as a result, the decision will be made early in 2012 to go ahead and implement it fully, as we seriously believe that this Treaty offers considerable benefits to the UK MoD and Industry. However, we must ensure that we are in a position to make an informed decision on whether to go ahead and implement the Treaty, and that we are aware of any and all potential unforeseen pitfalls which we could come across.
8. US Proposals on Dual and Third Country Nationals
8.1. On 15 August 2011 the new US Regulations on ITAR controls impacting on dual and third country nationals came into force. Since January 2011 a UK MoD-led British Government team had been having a series of meetings with leading experts from UK Industry (facilitated by EGAD) to discuss what the UK was going to be doing to implement these new regulations. As a result of these efforts, the UK has been one of the very few countries to have put into place interpretations, guidance and comprehensive plans for the implementation of these new regulations.
8.2. We regard this as having been a model for future consultations on similar topics of equal importance which may arise. However, there are still concerns, especially in the light of the MoD legal adviser’s refusal to confirm otherwise, that the implementation of screening arrangements as required to use the exemption at Part 126.18(c)(2) of the International Traffic in Arms Regulations may continue to conflict with UK employment and human rights legislation, thereby exposing UK companies to legal risk.
9. US Export Control Reform
9.1. We remain hugely supportive and enthusiastic about the enormous potential benefits for all parties which may arise from the on-going export control reform process which is underway in the USA, if this is able to reach full fruition and implementation, as envisaged.
10. Anglo-French Treaty
10.1. There have been discussions, under the framework of the Defence and Security Co-operation Treaty between the French Republic and the UK, of 2 November 2010, of how defence trade and cooperation between these two countries can be further expanded upon, and these discussions will be continuing, within the context of the EU’s own proposals to make intra-community transfers of defence and security goods less bureaucratically-burdensome. EGAD fully supports these efforts to reduce the bureaucracy which is currently inherent in bilateral defence trade and collaboration between the UK and France, as we would with all of our other countries who are deemed not to be destinations of concern in of themselves, and also to have in place effective national export control systems and procedures to prevent potential diversion to undesirable third parties elsewhere.
11. Arms Trade Treaty
11.1. We remain engaged with the Foreign & Commonwealth Office (FCO) as the negotiations towards the final agreement on an international ATT come to fruition, hopefully at the July 2012 Conference at the United Nations, in New York. We are supportive of the philosophy which underpins the ATT discussions, which we hope result in the framing and adoption of a Treaty which will be as effective as possible in curbing the activities of irresponsible proliferators.
11.2. We are of the view that the final ATT needs to be kept as simple as possible, so as to enable it to have any chance of being able to be implemented around the World in a consistent way by nations who are signatories to it, many of whom will, of necessity, require considerable support and assistance in trying to put in place the necessary and robust control systems and procedures which will be essential.
12. “Red Tape Challenge”
12.1 EGAD welcomed the launch of the UK Government’s “Red Tape Challenge”, one facet of which deals with export licensing (http://www.redtapechallenge.cabinetoffice.gov.uk/export-control/).
12.2 In practice, most of the current (and many of the potential future) problems in this regard are outside of the control of the UK Government, and, in fact, emanate from the EU Commission, and specifically from EU law. This means that a more effective method to cutting red tape would be for stronger UK representation at EU level against the introduction of such measures.
13. Awareness of ITAR
13.1. Industry is concerned at the lack of an understanding of the implications of ITAR within DE&S, and the UK MoD, and confusion on re-export and re-transfer matters under ITAR. In some instances this would have placed the IPT’s decision in direct conflict with ITAR rules. Industry would suggest that there is a need to raise awareness within the DE&S, and other parts of UK MoD, of the legal implications of decisions taken by IPTs that have export control consequences.
10 October 2011