International Law Advisory - Client Advisory on Export Controls in the UK

The UK Export Controls Act 2002 (“ECA”) came into force on  May 1, 2004, replacing the export control provisions of the Import, Export and Customs Powers (Defence) Act 1939.  The ECA is intended to provide a clearer legal framework for export control regulations in the  UK, to respond to technological advances, and to prevent illegal arms trading.  The key new regulations under the ECA are:

• the Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003;       
• the Trade in Goods (Control) Order 2003; and       
• the Trade in Controlled Goods (Embargoed Destinations) Order 2004 (collectively, “Regulations”). 

The text of the ECA and the Regulations can be found on the UK Department of Trade & Industry’s Export Control Organisation (“ECO”) website.

A.         Consolidation of Previous Dual-Use Controls   

The legislative changes under the ECA do not significantly affect the  UK rules for export of “dual-use” goods (i.e., goods that can be used for both civil and military purposes), such as encryption products, high-powered computers, and chemical processing, marine and aircraft equipment.  The Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003 re-enacts, consolidates and rationalises previous  UK dual-use export controls under the ECA, namely:

• the Export of Goods (Control) Order 1994, which implemented controls on exports of military and paramilitary goods (including software and technology) exported in physical form; and       
• the Dual-Use Items (Export Control) Regulations 2000, which implemented controls on exports of dual-use goods (including software and technology) in physical form and by electronic transfers.  

B.        New Controls On Military Goods 

The ECA and the Regulations also re-enact existing controls on exports of military goods and technology, but additionally introduce important new controls in this area:

1. Trade (trafficking and brokering) between non-UK countries:  The Trade in Goods (Control) Order 2003 prohibits individuals from marketing, brokering, arranging or negotiating a contract in the  UK for sales of “controlled” goods (i.e., military and certain paramilitary goods contained in the UK Military List) between overseas countries without an appropriate licence.  This control also applies to the trade activities of a  UK national anywhere in the world involving “restricted” goods (i.e., torture equipment, long-range missiles and components for these). 
   

There are three types of licences covering these trading activities:

• Standard Individual Trade Control Licence (SITCL) -- A SITCL is specific to a named trader and covers trading of a specified quantity of specified goods between identified source and destination countries, with a specified consignor, consignee and end-user.
  
• Open Individual Trade Control Licence (OITCL) -- An OITCL is specific to a named trader and covers involvement in trading of undefined quantities of specific goods between multiple source and destination countries and/or specified consignors, consignees and end-users.
  
• Open General Trade Control Licence (OGTCL) -- The OGTCL permits trading without the need to apply for individual licences.  Traders who are able to comply with the terms and conditions of the OGTCL are encouraged to utilize the OGTCL.  It covers trade from, and trade to, selected countries of all goods to which the trade controls apply (i.e., to all goods on the UK Military List) other than “restricted” goods, anti-personnel landmines and their components, and goods used in connection with weapons of mass destruction.

1. Copies of OITCL and SITCL application forms can be downloaded from the ECO website.  Details of the OGTCL and all other Open General Licences are available here.

The first major event affected by this new control was the July 2004 Farnborough Air Show.  HM Customs and Excise inspectors were present at the air show, carried out various on-the-spot inspections of controlled defense technology and equipment, and noted several violations.

• Embargoed destinations:  The Trade in Controlled Goods (Embargoed Destinations) Order 2004 prohibits individuals from trafficking and brokering sales of Military List items in the UK to an embargoed destination (such as Armenia, Azerbaijan, Bosnia and Herzegovina, Burma, Congo, Iran, Libya, Sudan and Zimbabwe), or any UK national from carrying out such activities overseas without authorisation.
• Embargoed destinations:  The Trade in Controlled Goods (Embargoed Destinations) Order 2004 prohibits individuals from trafficking and brokering sales of Military List items in the UK to an embargoed destination (such as Armenia, Azerbaijan, Bosnia and Herzegovina, Burma, Congo, Iran, Libya, Sudan and Zimbabwe), or any UK national from carrying out such activities overseas without authorisation.
  
• Transfers of military technology and software by electronic means:  The Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003  expands the previous control on electronic transfers of dual-use goods to cover transfers of “military” technology and software by electronic means including internet downloads, fax, email and telephone transmissions.
  
• Transfers of technology and the provision of technical assistance in connection with a weapons of mass destruction (“WMD”) programme:  The Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003 implements controls on the transfer of WMD technology (including transfers occur within the UK or the EU) and the provision of technical assistance by persons in the UK and UK nationals overseas, where the transferor knows or is informed that the technology or the technical assistance may be used in a WMD programme.   

C.        Penalties

The maximum penalty for knowingly breaching controls under the ECA carries a ten-year maximum term of imprisonment and/or an unlimited fine.  This updated UK export control regime reinforces the importance for UK exporters of strategic goods (particularly, companies in the arms exporting industry) of an internal export control compliance system to ensure that transfers of technology for military goods, technology transfers in connection with a WMD programme, or related trade activities, do not take place without an appropriate licence from the UK government. 

If you have any questions or would like to discuss the new  UK export control regulations, please contact  Maury Shenk (+44.207.367.8092) or  Winnie Chang.