The Export Control Organisation (ECO) has released its latest set of data on export licensing. For the first time, this has been produced to be compliant with the UK Statistics Authority’s code of practice for official statistics. It includes a range of new data tables and a statistical commentary which reveal some interesting trends.
The numbers of licences issued have held broadly steady over the last 12 months, with some 12,500 Standard Individual Export Licences (SIELs), 250 Open Individual Export Licences (OIELs), 130 Standard Individual Trade Control Licences and 1600 Open General Export Licence registrations per year.
It is too early to judge how far the ECO’s initiative launched in February to encourage greater use of OIELs will translate into a substantial shift from SIELs to OIELs. Nonetheless, the number of OIELs applications rose by 18% compared with the previous quarter, from 68 to 80.
Licences refused, revoked and rejected
SIEL refusals in Q1 of 2015 totalled some 65. These concerned primarily:
- Russia: 17 refusals, all on the basis of the embargo on all items for military end use;
- Ukraine: 5 refusals and 5 revocations, mainly of firearms and body armour, on the grounds of the risks of their use in civil conflict or diversion;
- China: 8 refusals, for biotechnology and cryogenic equipment, sonars and imaging cameras, refused on the grounds of the risk of diversion to an undesirable end-use, UK national security and human rights concerns;
- Pakistan: 7 refusals, all on the grounds of WMD end-use, for chemicals, generators and alloys;
- Iran: 6 refusals, all under the sanctions regime, for corrosion resistant piping, pumps and seals (potentially of use in a nuclear weapons programme);
- Thailand: 4 refusals of imaging and cryptographic equipment, and riot control gear, given the risks of their use for internal repression;
- India: 3 refusals, for components for submarines and instrumentation cameras, on the grounds of UK national security and risk of diversion (presumably to India’s nuclear weapons programme);
- Egypt: 2 licences refused, for firearms and weapons sights, given the risks of their use for internal repression;
- Qatar: 2 refusals for general laboratory chemicals, on the grounds of diversionary risk (presumably to Iran);
- Other refusals were primarily on the basis of arms embargoes (one each in Argentina, Azerbaijan, Burma, Liberia, and Syria) and risk of diversion to a prohibited or undesirable end use (Cyprus, Singapore, South Africa, Sri Lanka, Tanzania, Turkey and UAE). Israel is notable by its absence from this list, as most licensing activity was suspended pending clarification of the security context there.
Of the 80 OIEL applications, some 12.5% were refused, and 2.5% were revoked. The great majority of the refusals were for Nuclear, Biological and Chemical protection equipment (refused for Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Jordan, Lebanon, Malaysia, Nicaragua, Oman, Panama, Peru, Saudi Arabia, Turkey, UAE, Uruguay and Venezuela). The other main types of items refused were ammunition, imaging equipment, cryptographic equipment and body armour.
Application processing times
These have taken a dip. The ECO missed its published target to process 70% of SIEL applications within 20 working days, managing 68% (the figures for April and May, made available separately, are below 50%). The median processing time has gone up from around 13 working days last year to over 18 working days. OIELs also missed their target of 60% processed within 60 working days, reaching 56%.
Top 5 items refused licenses
For military goods these were: firearms, armour, ammunition, military technology and military development, test and production equipment. For non-military goods, the top five were: ‘End use’ (i.e. non-listed items destined for WMD or sanctioned military use), imaging cameras and equipment, ‘IRN’ (i.e. non-listed items prohibited for export to Iran), and nuclear reactor components and technology.
End user destinations in 2014 for SIELs
China was the end user destination with the highest number of licences granted for exportation of strategic goods under Permanent Standard SIELs, with 930 licences. India, the US and South Korea also topped 500 licences, with UAE, Turkey, Singapore, Taiwan, South Africa and Saudi Arabia making up the rest of the top ten.
However, Taiwan was the destination with the highest value, with licences issued for £980 million worth of goods (as valued by applicants). But this only gives a partial picture of total UK controlled exports as it excludes those exported under Open Licences.
What do firms need to do and how can Dechert assist?
Of the possible lessons to be drawn from this latest data, we would pick out three:
- use Open Licences wherever possible, particularly given the additional burden and risk of delays in the processing of SIEL applications;
- for SIEL applications, allow sufficient time: 18 working days is now the median, but sensitive products and/or destinations can take much longer;
- note the types of products and destinations for which SIELs and OIELs are being refused. This can be a valuable guide to business development risks and opportunities. More generally, exporters to the more sensitive destinations should be alert to the political and security context, which is the primary driver of licence refusals and revocations.
Dechert has a unique depth of expertise in helping clients to achieve full compliance with export controls (US as well as UK/EU) in ways which are proportionate to their level of risk, integrated with other trade compliance requirements (including sanctions, AML, ABC, customs, import, anti-dumping) and which minimise the impact on their business.
We benefit from a global network of both top-ranked international trade lawyers and senior former negotiators and regulators with practical experience of designing and implementing the regulations, and close links to the senior officials who continue to fulfil these roles. Our extensive experience advising clients on export controls includes:
- auditing compliance programmes to understand the risks, to identify gaps and to develop efficient procedures tailored to the business’ structure, resources and risk profile;
- clarifying what items and activities are and are not subject to controls, classifying items under the Control Lists and securing the most appropriate licences with minimal delay;
- drafting appropriate warranties and indemnities in contracts or terms and conditions to mitigate any liabilities;
- preparing voluntary disclosures and engaging with regulatory agencies in respect of potential breaches;
- bespoke training programmes and helpdesk advisory services.