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Session 2001- 02 Publications on the internet Other Bills before Parliament Arrangement of Clauses (Contents)

Export Control Bill

These notes refer to the Export Control Bill as brought from the House of Commons on 9th November 2001 [HL Bill 20] EXPORT CONTROL BILL ________________ EXPLANATORY NOTES INTRODUCTION 1.     These explanatory notes relate to the Export Control Bill as brought from the House of Commons on 9th November 2001. They have been prepared by the Department of Trade and Industry (DTI) and the Department for Culture, Media and Sport (DCMS) in order to assist the reader in understanding the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2.     The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So, where a clause or part of a clause does not seem to require any explanation or comment, none is given. BACKGROUND 3.     The Import, Export and Customs Powers (Defence) Act 1939 ("the 1939 Act"), and in particular section 1, provides the Secretary of State with a general power to impose import and export controls on goods. The 1939 Act was considered to be a temporary measure to deal with the emergencies of the time. However, the 1939 Act has remained in force ever since (although it was amended by the Import and Export Control Act 1990 to allow it to continue in force without relying on the continued existence of "the emergency" that existed in 1939). 4.     The Scott Inquiry (Sir Richard Scott's Report of the Inquiry into the Export of Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions in February 1996 (HMSO, 0-10-262796-7)) identified a number of limitations in the 1939 Act, including the lack of parliamentary scrutiny of secondary legislation made under the Act and the absence of any indication of the purposes for which export controls may be imposed. In July 1998 the Government published a White Paper on Strategic Export Controls (Cm 3989), which set out proposals for new primary export control legislation. These took into account the recommendations made by Sir Richard Scott (now Lord Scott of Foscote) and are reflected in the Bill. SUMMARY 5.     The Bill provides for: parliamentary scrutiny of secondary legislation made under the Bill (clause 12); and the purposes for which an order imposing export controls, transfer controls, trade controls or technical assistance controls may be made (clause 5 and the Schedule). 6.     The Bill includes powers to: impose controls on exports from the UK; impose controls on the transfer of technology from the UK and by UK persons anywhere by any means (other than by export); impose controls on the provision of technical assistance overseas; impose controls on the acquisition, disposal or movement of goods or on activities which facilitate such acquisition, disposal or movement (this is often referred to as trafficking and brokering); apply measures in order to give effect to EU legislation on controls on dual-use items (i.e. items with a civil and potential military application); prescribe licensing procedures in respect of any of the controls imposed; require exporters to supply information and pass such information on to relevant national and international organisations, for example to enable the UK to comply with its international reporting commitments; require the Secretary of State to report annually to Parliament on the controls imposed on both strategic and cultural exports under the Bill; enable penalties for export control offences to be imposed, increased or varied to reflect the seriousness of the offences. 7.     The powers in the Bill are conferred on the Secretary of State. In practice the Departments with direct responsibility for export controls are the DTI, who are responsible for strategic export controls, and the DCMS, who are responsible for the export control of objects of cultural interest. COMMENTARY ON CLAUSES Clause 1: Export controls 8.     Subsection (1) gives the Secretary of State power to make orders imposing controls on the export of any goods and to make provision about matters connected with the imposition of export controls. It is intended that the existing controls on the export of goods will be reviewed and (where necessary) revised under this power. 9.     It is envisaged that the DTI will use these powers to consolidate existing secondary legislation on export controls, namely the Export of Goods (Control) Order 1994 (as amended) and the greater part of the Dual-Use Items (Export Control) (Regulations) 2000 (made under the European Communities Act 1972). In particular, the secondary legislation will specify the goods or classes of goods whose export will be subject to control. With regard to future secondary legislation on strategic export controls, it is expected that all such legislation should in future be made under the powers contained in the Bill. 10.     It is envisaged that the DCMS will establish controls over the export of any goods (with limited exceptions for personal papers etc.) manufactured or produced more than 50 years before the date of exportation. 11.     Subsection (3) allows controls to be placed on the export of goods wholly or partly on grounds of the uses or possible uses to which the controlled goods may be put, or because of information obtainable from the goods, eg. information obtainable from a computer disk. An example of legislation which, amongst other things, applies export controls by reference to the end use to which goods may be put as opposed to their physical description is Council Regulation (EC) No 1334/2000 of 22 June 2000 (which is implemented in the UK in respect of certain enforcement provisions by the Dual-Use Items (Export Control) Regulations 2000). 12.     Subsection (4) provides that the power to impose export controls is subject to clause 5, which states that such controls may only be imposed for purposes specified in the Schedule. 13.      Subsection (5) ensures that an order made under this clause may make provision supplementing controls imposed by Community regulations on the export of goods, for example provision for the enforcement of such a regulation. 14.     Subsection (6) clarifies that goods subject to export control include vehicles, vessels and aircraft themselves, whether or not they are moving under their own power or contain cargo or passengers. Clause 2: Transfer controls 15.     Subsection (1) provides the Secretary of State with order-making powers to introduce transfer controls on any type of technology and to make provision about matters connected with the imposition of such controls. 16.     The Secretary of State can use these powers to control the transfer of technology by any means and to specify the technology or classes of technology to be controlled. 17.     For example, he may make an order to introduce, in respect of all technology controlled under national export legislation, controls on the transfer of that technology by any electronic means. In addition, he may make an order to control transfers of technology by any means where the provider of information knows or is informed by Government that the activity in question is intended for use in connection with a weapons of mass destruction (WMD) or related missile programme. 18.     This power will (together with the powers in Clause 3) allow implementation of the European Union Joint Action of 22 June 2000 concerning the control of technical assistance related to certain military end-uses (2000/401/CFSP) agreed by the UK and other EU Member States. The Joint Action commits Member States to bring forward legislation to control the provision of technical assistance outside the EU which is intended or which the provider is aware is intended for use for WMD or missiles capable of their delivery. The Joint Action requires controls to be introduced only in respect of activities undertaken outside the EU. 19.     Subsection (2) defines what is meant by "transfer controls", making it clear that the Secretary of State may prohibit or regulate transfers of technology such as transfers by e-mail, fax and telephone (defined in subsection (6) as the transfer of technology by any means, including by oral communication, other than the export of physical goods) that are made: by a person or from a place within the UK to a person or place outside the UK; by a person or from a place outside the UK to a person or place also outside the UK, where the transfer is done by or is within the control of a UK person; by a person or place within the UK to a person or place also within the UK where there is reason to believe that the technology may be used outside the UK; by a person or from a place outside the UK to a person or place within the UK where there is reason to believe that the information may be used outside the UK and the transfer is by or within the control of a UK person. "United Kingdom person" and "place" are defined in clause 10. 20.     Subsection (4) provides s that the power to impose transfer controls is subject to clause 5, which states that such controls may only be imposed for the purposes specified in the Schedule. 21.     Subsection (5) ensures that an order made under this clause may make provision supplementing controls imposed by Community regulations on the transfer of technology, for example provision for the enforcement of such a regulation. 22.     Subsection (6) defines "transfer" and "technology". Clause 3: Technical assistance controls 23.     Subsection (1) provides the Secretary of State with order-making powers to prohibit or regulate the participation in the provision outside the UK of any form of technical assistance or to introduce related controls. 24.     Subsection (2) defines "technical assistance controls" as the prohibition or regulation of participation in provision of technical assistance outside the UK, and "technical assistance" as services provided, used, or capable of use, in connection with development, production or use of goods or technology. For example, technical assistance might take the form of maintenance or repairs in connection with a weapons of mass destruction programme overseas. 25.     Subsection (3) allows controls to be placed on the provision of technical assistance wholly or partly on the grounds of the uses to which the technical assistance itself, or the goods or technology in connection with which it is provided, may be put. This power will enable the implementation of the European Union Joint Action as described above. 26.     Subsection (4) provides that the power to impose controls on provision of technical assistance overseas may only be exercised in connection with export or transfer controls imposed under clauses 1 and 2, or in connection with any directly applicable European Community provision on export of goods or technology transfer. The power is also subject to clause 5, which provides that such controls may only be imposed for purposes specified in the Schedule. 27.     Subsection (5) defines the type of "participation" that falls within the scope of subsection (1). Subsection (6) allows an order to make provision for giving effect to a directly applicable Community provision in this area. 28.     Subsection (7) provides that controls may be imposed under this clause on things done outside the UK where the activity subject to control is conducted by a UK person or a person acting under the control of a UK person, for example assistance abroad provided by a foreign employee of a UK company. 29.     It is envisaged that the Secretary of State will for example use the powers conferred by subsection (1) to make an order prohibiting or regulating the provision outside the EC of technical assistance where the provider of the technical assistance knows or is informed by Government that the activity in question is intended for use in connection with a weapons of mass destruction (WMD) or related missile programme. Powers given under this clause will allow implementation of the European Union Joint Action (mentioned under clause 2 above) Clause 4: Trade controls 30.     Subsection (1) enables the Secretary of State to make orders imposing trade controls in relation to goods or to make supplementary provision in connection with the imposition of such controls. 31.     It is envisaged that the Secretary of State will use these powers to introduce controls on the acquisition, disposal and movement overseas of certain military and paramilitary equipment which is currently subject to export controls and on any equipment covered by an arms embargo. It is not envisaged that the Secretary of State will use these powers to impose trade controls on the acquisition, disposal or movement of goods where those goods remain within a single overseas country. 32.     Subsection (2) defines "trade controls" as the prohibition or regulation of the acquisition, disposal or movement of goods, or other activities that facilitate or are otherwise connected with such acquisition or disposal. (Such international trade in goods is sometimes known as trafficking and brokering.) 33.     Subsection (3) allows controls to be placed on the trade in goods wholly or partly on the grounds of the uses to which those goods may be put. 34.      Subsection (4) provides that the power to impose trade controls may only be exercised in connection with export or transfer controls imposed under clauses (1) and (2), or in connection with any directly applicable European Community provision on export of goods or technology transfer. The power is also subject to clause 5, which provides that such controls may only be imposed for purposes specified in the Schedule. 35.      Subsection (5) provides that the powers given to the Secretary of State in subsection (1) include the power to make provisions in relation to any controls on participation in or other activities which facilitate the acquisition, disposal or movement of goods, pursuant to the application of EU legislation in the UK. 36.     Subsection (7) makes it clear that controls can be imposed on the actions of persons other than actual parties to a sales contract. For example, a person who acts as an agent bringing parties to an arms deal together would be subject to controls even though he would not himself be a party to a sales contract. 37.      Subsection (8) provides that the powers in subsection (1) may be exercised in relation to activities conducted outside the UK and the Isle of Man (which is in a customs union with the UK) where these are conducted by a UK person or by a person acting under the control of a UK person. Clause 5: General restriction on purposes of control orders 38.     Subsection (1) provides that the powers given to the Secretary of State to make control orders may only be used for the purposes set out in the Schedule. Control orders are defined in section 10(1) as orders under any of clauses 1(1), 2(1), 3(1) or 4(1). Any controls imposed by the DCMS are likely to be imposed for the purposes in paragraphs 1, 2 or 8 of the Schedule. 39.     Subsection (2) provides that the purposes listed in the Schedule do not apply to the making of an order where the order expires within 12 months or where provisions in an order imposing export, transfer, trade or technical assistance controls themselves provide for their expiry within 12 months. 40.     It may be considered necessary in circumstances other than those mentioned in the Schedule to introduce orders imposing export controls, transfer controls, technical assistance controls or trade controls on a temporary or emergency basis. Clause 12(2) specifies the affirmative resolution procedure for such orders, which means that any orders made, while having immediate effect, will cease to have effect if not approved by both Houses of Parliament before the end of a 40 day period. 41.     Subsection (3) provides that the purposes listed in the Schedule in relation to which orders must be made do not apply to those provisions in orders that revoke, amend an earlier order, or re-enact provisions (with or without modifications) of an earlier order which are being revoked, except where the existing export, transfer, technical assistance or trade controls are strengthened or new controls are imposed. Subsection (4) explains that the reference to an "earlier order" does not include orders which fall within the scope of subsection (2) (temporary /emergency orders) which are excepted by subsection 1. Any amendment to an order under subsection (2) is therefore subject to the same considerations as the original subsection (2) order. Clause 6: Control powers: supplementary 42.     Subsection (1) deals with various matters which may be addressed in orders made under the Bill. These matters may include provision about the use of any information held under or in connection with the order, and the persons to whom it may be disclosed. They may also include provision to require persons to keep records and to provide an authority specified in the order with information about their activities. These will ensure that the UK is able to comply with its international obligations to provide information, for example to the United Nations Conventional Arms Register or Wassenaar Arrangement. 43.      The current maximum penalty for new or existing export control offences is 7 years' imprisonment. The Bill provides powers for the maximum penalty to be increased to 10 years' imprisonment. It is envisaged that the power will be used to ensure greater consistency across the spectrum of export control offences so that individual maxima reflect the seriousness of the particular offence. 44.     Subsection (2) allows, among other things, for orders to be made which bind the Crown. This is necessary in connection with European Community legislation that binds the Crown. Clause 7: Exercise of licensing powers under control orders 45.     Subsection (1) provides that the person exercising a licensing power conferred by a control order by virtue of paragraph 3, 4, 5 or 6 of the Schedule must have regard to, among other things, potential consequences of any activity being controlled that are listed in the Table in paragraph 7 of the Schedule. 46.       Subsection (2) provides that otherwise nothing in paragraph 7 of the Schedule limits the reasons justifying a decision to grant or refuse a licence or the matters to which regard may be had in exercising a licensing power. Under clause 8(2) regard must also be had to guidance published under that clause (which by virtue of clause 8(4) includes the consolidated criteria announced to Parliament on 26th October 2000). Clause 8: Guidance 47.     Clause 8 makes clear that the Secretary of State may issue guidance about matters to be taken into account in licensing decisions under any of the powers in the Bill. Subsection (4) makes clear that the existing consolidated EU and National Arms Export Licensing Criteria (against which the Secretary of State considers applications for export licences for military equipment and dual-use goods where there are grounds for believing that the end-user of such goods will be the armed forces or internal security forces or similar entities in the recipient country or that the goods will be used to produce military equipment) will constitute such guidance for the purposes of export and transfer controls, and this together with any other published guidance will apply until any new guidance is given. Clause 9: Annual reports 48.     This provides for the Secretary of State to report annually to Parliament on the operation of the Act both as regards the export of objects of cultural interest and as regards other matters relating to the operation of the Act, which in practice will be strategic export controls. Clause 11: Power to modify the Schedule 49.     This clause allows the Secretary of State to make an order amending the schedule (by affirmative resolution procedure - see clause 12(4)). Clause 12: Orders 50.     Subsection (2) requires orders that contain provisions made by virtue of clause 5(2) (i.e. orders which impose export or transfer controls and provide for their own expiry in 12 months or less) to be subject to the affirmative resolution procedure of both Houses of Parliament. The effect in this case is that any order made may have immediate effect but will cease to have effect if not approved by both Houses before the end of a 40 day period. 51.     Subsection (4) requires that orders that are made under clause 11 (i.e. orders that amend the Schedule) shall be subject to the affirmative resolution procedure of both Houses of Parliament. 52.     Subsection (5) requires orders made under clauses 1, 2, 3 and 4, other than those made by virtue of clause 5(2), and any orders made under clause 15(3) of the Bill, to be subject to the negative resolution procedure of both Houses of Parliament. Clause 14: Consequential repeals 53.     Clause 14 repeals provisions of the 1939 Act in so far as they relate to the prohibition or regulation of the export of goods. Clause 15: Short title, etc 54.     This clause deals with the short title, commencement and territorial extent of the Bill and also gives the Secretary of State powers to introduce by order transitional provisions and savings as appropriate in connection with the coming into force of any provision in the Act. Schedule: Purposes of control orders 55.     The Schedule sets out the purposes for which control orders may be made, where "control orders" means orders under sections 1(1), 2(1), 3(1) or 4(1). Subject to the exceptions discussed in the note on clause 5 above, control orders may only be made for one or more of the purposes set out in the Schedule. 56.     Paragraphs 2 and 3 allow orders to be made in order to give effect to Community obligations as well as the international obligations of the United Kingdom (whether as a member of the EU or by any other international agreement). 57.     Paragraphs 4 to 6 provide that the Secretary of State may make an order where it appears to the Secretary of State that there is a risk that the export of goods, transfer of technology, provision of technical assistance or trade in goods might have any relevant consequence. 58.     Paragraph 7 defines what is meant by a relevant consequence. FINANCIAL EFFECTS OF THE BILL 59.     The Government does not expect significant public expenditure implications to arise from the new controls proposed under the Bill, which relate specifically to the transfer of technology (clause 2), provision of technical assistance overseas (clause 3 and international trade in goods (clause 4). Additional costs will be incurred by the DTI as the licensing authority, and by other Government Departments who are consulted about licence applications, primarily the Foreign and Commonwealth Office (FCO) and the Ministry of Defence (MoD). In addition, enforcement costs will be incurred by HM Customs & Excise. However, it is not envisaged that the overall impact on public expenditure as a whole would exceed an increase of £800,000 in the first year and £570,000 per annum thereafter. SUMMARY OF THE REGULATORY APPRAISAL Provisions relating to transparency and accountability 60.     The provisions of the Bill relating to the purposes of export control and requiring parliamentary scrutiny of orders will have no direct impact on business. The power to require exporters to retain and pass information to Government will be used to obtain information needed to meet international obligations which at present is provided by exporters on a voluntary basis. This requirement will therefore impose no new burden on those exporters who currently comply with the Government's request for such information. Export controls 61.     The main export powers contained in the Bill will have no new impact on business as these will be used to introduce orders imposing controls already contained in secondary export control orders made under the 1939 Act, whose export control powers the Bill will replace, and regulations made under the European Communities Act 1972. Controls on technology transfer and the provision of technical assistance 62.     The Bill contains powers to allow the Government to impose controls on the transfer of technology and the provision of technical assistance. The controls which it is intended to introduce under these powers were described in the consultation document on the draft Bill published on 29th March 2001. The new controls to be introduced on the provision of technical assistance which is known to be or may be intended for use in connection with weapons of mass destruction or missiles capable of their delivery should have only a minimal impact on business. 63.     The new controls proposed on the transfer of military technology by electronic means will have some impact on business, but are not likely to impose major new burdens. These controls will bring controls on military technology into line with controls on the export of dual-use technology which were introduced by European legislation in September 2000. Experience of operating the controls on dual-use technology since September suggests that there is unlikely to be an increase in licence applications of more than 100-150 standard individual licence applications (out of the 10,000-11,000 applications for export licences received by the DTI each year) as a result of bringing in controls on the electronic transfer of military technology. Controls on trade between overseas countries (trafficking and brokering) 64.     The Bill contains powers to allow the Government to impose controls on trade between overseas countries Again the controls which it is intended to introduce under these powers were described in the consultation document on the draft Bill. The new controls proposed on trade in equipment whose export the Government has already banned because of evidence of its use in torture, and on trade to embargoed destinations of equipment covered by the embargo, should have minimal impact on business. 65.     The proposal for new controls on trade between overseas countries in certain military and paramilitary equipment will have an impact on business as this will introduce a licensing requirement for such activities. Although difficult to estimate, it is considered unlikely to lead to more than 100-250 additional standard individual licence applications, given the intention to use open licensing to permit such trade between countries where there is to cause for concern. 66.     A copy of the full Regulatory Impact Assessment can be obtained from the website of the DTI's Export Control Organisation at http://www.dti.gov.uk/export.control. Copies can also be obtained from Robin Ashman, Department of Trade and Industry, 4 Abbey Orchard Street SW1P 2HT (tel 020 7215 0512) or by sending a request by email to the following address: exportbill.views@gsi.gov.uk. EUROPEAN CONVENTION ON HUMAN RIGHTS 67.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Lord Sainsbury of Turville, Parliamentary Under Secretary for Trade and Industry, has made the following statement: "In my view the provisions of the Export Control Bill are compatible with the Convention rights."