Reforms in the UK Export Control Organisation (ECO)
The ECO is making a combination of reforms, intended to improve its service in support of responsible defence and security exports while at the same time ensuring that the objectives of strategic trade controls to protect global and national security continue to be met.
It was announced in the UK’s National Security Strategy and Strategic Defence and Security Review 2015 that, in the context of a wider restructuring of the UK’s national security structures to promote a whole-of-government approach, to remove duplication and to consolidate national security expertise across government, 7 new policy-making and delivery Joint Units will be established in 2016. One of these will be a new Exports Controls Unit, hosted by the Department for Business, Innovation and Skills, ‘to provide coordinated cross-government operation of export controls’. The Unit will combine the existing staff and resources of the ECO with those of the export licensing casework teams in the Foreign and Commonwealth Office and the Ministry of Defence, who are currently the main advisers to the ECO in assessing licence applications.
The Unit will report jointly to the Business, Defence and Foreign Secretaries.
This change is primarily structural and is not expected to lead to significant changes in the export controls system, at least in the short term. But it will provide a single interface between the government export controls community and MPs, business and NGOs, and over the longer term it should help ensure a more rationalised and cross-government approach to challenging issues. It is understood that making financial savings is not a driver behind the restructuring, but efficiencies may nonetheless be expected to emerge from the consolidation of staff from separate Departments.
The design of a replacement for the ECO’s current online licence application system, SPIRE, has just been launched. The project is an integral and early part of the wider programme, ‘One Government at the Border’ being led by HM Revenue and Customs to deliver a single, coherent service for the movement of goods across the UK border. The ECO are taking a ‘from first principles’ look at the service that they currently provide, to identify what their customer organisations want, in order to deliver improvements in the future. No specific timetable for the project has been announced; it is intended to progress by designing and testing small, discrete sections of the new system and rolling them out more widely when they are judged to be ready.
The ECO has periodically reviewed its current policy of not charging exporters for licences. This has been looked at again recently and the conclusion reached that no charges should be introduced. But it is understood that this may be revisited again in due course.
The requirement, when applying for most types of export licence, to obtain signed, hard-copy undertakings from the end-users of controlled exports, comprises a significant proportion of the administrative burden for exporters, and incorrectly completed undertakings are the most frequent cause of delays in approving licence applications. The ECO has launched a review of the requirement and the scope its simplification while continuing to satisfy the need for assurance that the proposed exports will not be used or re-exported for unauthorised purposes.
Open general export licences
The ECO is examining the scope to expand the existing range of these licences, which impose a significantly lighter administrative burden than other types of licence on both exporters and government regulators, at the price of reducing the government’s scrutiny of controlled exports and thereby increasing the risk of an export being misused. It is understood that a number of options are under active consideration and that recommendations will be put to Ministers for the possible introduction of new and/or expanded licences early in 2016, subject to Ministers’ risk appetite and other dependencies.
Classification advice service
This service, providing official classifications of potentially controlled items at the request of exporters, was suspended last year due to a lack of resources in the ECO. Exporters have lobbied hard for its reinstatement as there is currently no means in the UK to secure a definitive ruling on whether an item requires an export licence and, if so, which Control Entry applies to the item, other than by submitting an application for a Standard Individual Export Licence. While it remains to be confirmed, it is understood that it is likely that the service will be re-instated in Spring 2016.
Working in collaboration with the main trade associations, the ECO is overhauling the guidance material it provides for exporters, particularly on the gov.uk website. The intention is to rationalise the information available, ensure that it is kept up-to-date, and to provide more guidance on the potential for licence applications to be refused, for example on the grounds that the exports might be diverted to an undesirable end-use or might be used to violate human rights.
Arms brokers and trade controls
The ECO published in July the findings of its review and public consultation on whether to establish a pre-licensing register of arms brokers. It concluded that the few potential benefits of introducing a register would not be sufficiently beneficial so as to justify additional regulation of legitimate UK businesses and that the UK’s existing trade control legislation is sufficiently robust. It is understood that no further review of this area is planned. However, revised arrangements to improve the control of firearms and other equipment moved between foreign countries by UK Maritime Anti-Piracy security firms are to be introduced.
Finally, in parallel to the ECO’s reforms of the UK’s national processes, the European Commission is continuing to take forward its review of EU controls on dual-use items, launched in 2011. The public consultation closed in October, and the results of an impact assessment are expected to be published shortly. The Commission is expected to set out its proposals for both regulatory and non-regulatory changes in Spring 2016, but the timetable may continue to slip.
What does this mean for you and how can Dechert help?
These reforms represent significant opportunities to improve the efficiency of the UK’s export licensing system and to reduce the administrative burden on exporters. For those reviews which remain to be concluded, exporters should consider feeding-in their views to the ECO or through their trade association. As the changes are implemented, exporters should review their own procedures and take advantage of any scope for streamlining them.
Dechert has unique expertise in helping our clients to achieve full compliance with export controls and sanctions (US as well as UK, EU and for other national jurisdictions) in ways which are proportionate to their level of risk, integrated with other trade compliance requirements and which minimise the impact on their business.