Committees on Arms ExportsSupplementary written evidence from the Export Group from Aerospace and Defence (EGAD)

RE: NEW INQUIRY BY THE COMMITTEES ON ARMS EXPORT CONTROLS INTO STRATEGIC EXPORT CONTROLS

Many thanks for inviting us to give oral evidence to the Committee, on 23 January.

Just to follow up on a few issues, which arose at that session, we hope that the following comments may be helpful:

General Comment: EGAD represents a particularly well-informed constituency of industry representatives. We realise that some members of the Committee may have been influenced by the myths which abound, both generically and, more specifically, about Industry’s attitudes to export control compliance. What we are seeking is to establish a proper and sensible working relationship with relevant British Government departments, getting across the fact that, not only are we on the same side, but a lot closer than some (or, indeed, many) may think or portray. They are the regulators, we are the regulated; we understand that, but it is in all our interests to work together and agree, wherever possible, thereby helping to ease the nugatory burden on Industry, maintain/increase exports, etc and achieve compliance—at a time of severe budget restraint, on both sides, but especially within Government. We can contribute significantly and positively, provided dialogue is carried out in a focussed and meaningful way.

Exhibitions: We can confirm that our representatives have personally seen a number of staff from the Export Control Organisation, the UK Ministry of Defence, Foreign & Commonwealth Office and HM Revenue & Customs ( to name but three) going around a number of major exhibitions in the UK, such as the Defence & Security Equipment International (DSEi) and the Farnborough International Airshow (FIAS), to name but two. These staff have been extremely active in seeking out exhibiting firms, in collaboration with the exhibition organisers, and ensuring that these companies are obeying our laws, as well as the organisers’ own robust regulations about what can and what cannot be promoted at these events.

We are aware of a number of informal compliance enforcement actions which have been undertaken against exhibitors at these events since 2004. The very warmly welcomed additional compliance enforcement monitoring activity which is undertaken by the likes of Amnesty International is hugely beneficial, in our view, in helping to “sweep up” what has not already been spotted by the Government experts.

US Export Control Amendments: We briefly touched on our concerns during our evidence session relating to the fact that on 19 December 2011 the US Department of State finally released its “Amendment to the International Traffic in Arms Regulations: Registration and Licensing of Brokers, Brokering Activities, and Related Provisions” proposals for public consultation, which are available to see at: www.pmddtc.state.gov/FR/2011/76FR78578.pdf. The deadline for responses is Friday 17 February 2012.

Whilst the existing US regulations to control brokering are not as well-defined as many would like, the new proposals, are open to even wider interpretation. As such, they carry significant risk to UK Industry’s competitiveness and exposure to US extraterritorial reach. These concerns are also shared by EU and US Industry. Four broad areas of concern arise from these proposals:

The term “Broker” includes any person engaged in brokering activities and is no longer limited to those “who act as an agent for others”. This is much wider than any definition used by the UK and in the EU;

A much broader range of activities are defined as brokering: financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import of a defence article or defence service;

Foreign persons outside the US would be caught where the above activities involve a US origin defence article, even if these articles are already covered by an existing US export authorisation. This would include any marketing, including potentially the activities of trade organisations, such as ADS, BNEA, Intellect and SMI, in support of UK Industry;

Registration with the US Department of State of any “Broker” will be required at an annual cost of US$2,250 and the identification of all participating parties in a transaction together with their names, addresses, and other information that may be contrary to UK and EU data protection laws.

We believe that these proposals could result in:

Those who do not currently regard themselves as being “Brokers”, including those who are exporting to the US, or operating in support of their corporate affiliates, being required to register;

Commercially confidential information being provided to the Department of State before a contract has been concluded when prior approval of brokering activities is required;

Undermining the UK Government’s stated “Red Tape” commitment to reduce bureaucracy;

A huge extension to the US State Department’s extraterritorial reach and ability to interfere in the activities and policies of non-US entities.

Whilst we in UK, US and European Industry will be submitting our own views on the proposals by 17 February, we feel very strongly that comment must also come from Governments. We have been told there are three communities the Department of State will listen to: The White House, Congress and Allied Governments. To that end, Industry associations in Europe will be working with us to engage the 6 Governments from the Letter of Intent.

Industry, therefore, is seeking for HMG intervention at an appropriate level to achieve a pause and to allow adequate time for a meaningful Government-to-Government dialogue to take place prior to any final new rule being published.

Extraterritorial Regulations: Whilst we are aware that the UK does have in place a number of statutes which seek to exert an extraterritorial jurisdictional reach over the activities of UK nationals overseas, these are in areas such as drug smuggling, paedophilia, bribery & corruption, terrorism, etc, as outlined in Annex 3 (Extra-territoriality (offences)) of the Committee’s latest report (of April 2011)—see: www.publications.parliament.uk/pa/cm201011/cmselect/cmquad/686/68617.htm. As we sought to point out, all of the offences listed in this annex are blanket prohibitions, rather than activities for which those involved can and do seek official licence approvals from the UK Government to be allowed to undertake them, and all of them are areas in which all responsible people everywhere would agree should be prevented from taking place. Therefore, any attempt to extend this concept to the export of normal and standard defence/security materiel and services from one country to another is fraught with problems, in our view, as this is not held in the same degree of universal abject revulsion and contempt as the above activities are, and are, indeed, actively supported and encouraged by most Governments around the World. Therefore, the potential imposition of such measures by the British Government would be fraught with legal, political and technical problems, which, in our view, would have to be very carefully thought through before being introduced.

Strategic Export Controls Training: EGAD and Cranfield University have jointly developed some training courses to address the perceived need for staff in UK defence and dual-use companies on strategic export control issues. These come at four levels, running from: Level 1—a c.30-minute on-line basic training course relevant for all staff in such companies; Level 2—a c.50-minute on-line slightly more detailed training course relevant for relevant “points of contact” within companies who need a little bit more information; Level 3—a combination of the Level 2 course, plus a day’s worth of face-to-face training by some leading experts, which is relevant for export control staff in companies; and Level 4—a module from an MSc course, which is relevant for senior export licensing staff within companies. If it would be in any way potentially beneficial, we would be delighted to arrange for any Members of the Committee who may be interested, the ability to take advantage of either the Level 1 or the Level 2 course for free.

We hope that the Committee may be interested in the above additional evidence.

3 February 2012