New UK Open General Export Licences for Components
UK exporters may now use two new Open General Export Licences (OGELs), reducing the administrative burden of exporting a range of military and dual use components, including printed circuit boards.
The UK’s Export Control Organisation (ECO) had originally hoped to issue a single new OGEL for a much wider range of both military and dual-use components at this time. This would have included many components specially designed for military use, to respond to long-standing industry concerns that the licensing requirements for many items - particularly printed circuit boards (PCBs) - are disproportionately burdensome. It is understood that discussions between the government Departments concerned are taking more time than had been anticipated. These more limited new OGELs have therefore been issued in the interim while those discussions continue. But the intention remains to issue a single, wider licence in the coming months.
OGEL (PCBs and Components for Military Goods)
The new licence contains all the standard conditions for military OGELs with two main differences:
- the licence does not require a formal, written undertaking from the consignee to confirm the end-use of the goods. This will considerably simplify the use of the licence. But it remains advisable nonetheless to conduct due diligence on the end-user and their intended end-use of the goods to be satisfied that they will meet the conditions of the licence, and to include this as a requirement in the sales contract and/or Terms and Conditions;
- the licence does not include the usual option of applying to the Ministry of Defence for a ‘Form 680’ to permit the release of information subject to a security classification of ‘Official-Restricted’ or above. Goods with such a classification may not be exported under this licence.
The licence covers all unpopulated (i.e. bare) printed circuit boards, connectors, wiring looms and harnesses, fasteners, washers, spacers, insulators, grommets, bushing, springs, cable and wire as specified in the UK Military List categories:
- ML5 (fire control and related equipment);
- ML6 (ground vehicles);
- ML 9 (vessels);
- ML10 (aircraft, other than items relating to unmanned aerial and lighter-than-air vehicles);
- ML11 (electronic equipment related to any of these categories, except certain components usable in missiles with a range over 300km);
- ML15d (infrared and thermal imaging equipment); and
- ML22 (technology related to any of these categories).
It is understood that the ECO is open to well-reasoned proposals from exporters to widen the scope of the licence to include other categories or items. If the ECO agrees, they will amend the licence accordingly. But, having decided against earlier proposals to include items in ML4 (bombs and missiles), the ECO clearly remains cautious about this category.
The licence is valid for all countries except those subject to an arms embargo (which, for the UK, continues to include Argentina). Additionally, Pakistan and China are excluded, as they are from most other military OGELs given the sensitivity of military exports to those countries.
OGEL (PCBs and Components for Dual-Use Goods)
The new licence includes all the standard conditions of dual-use OGELs. In common with the Military Goods licence, it does not require a Consignee Undertaking to confirm the end-use of the goods.
The licence covers all the same types of components as the military OGEL (i.e. unpopulated printed circuit boards, connectors, etc.) as specified in all the categories in the EU Dual-Use list1 that include specially designed components, except for goods controlled by the Missile Technology Control Regime (e.g. most items in Category 7, Navigation and Avionics) given the higher risks involved in the export of such goods.
The licence is valid for all countries (except, as usual for dual-use OGELs, EU Member States and countries eligible for the EU General Export Authorisation) with the exclusion of countries subject to an arms embargo. Additionally Pakistan is excluded - but, unlike the military OGEL, China is included as a permitted destination.
The Next New OGEL – Encryption?
Consideration is also being given to a new OGEL to cover ‘information security’ products using encryption, controlled under Category 5 Part 2 of the Dual-Use list, one of the largest categories by volume of controlled UK exports. But before that is taken forward, UK industry is pressing for many such products to be taken out of export controls altogether by a less restrictive interpretation of the definition2 of a ‘mass market’ item.
UK exporters argue that many items that are licensable in the UK do not require a licence in the US or in some other EU Member States. This causes UK companies to lose business and increases the licensing burden both on them and on the UK Government. This licensing requirement is without evident security benefits (i.e. from restricting access to sensitive equipment by those who might misuse it) since the items can be freely obtained from the US and elsewhere. In the US, they argue, clearer guidance, based on a less restrictive interpretation of the controls, enables exporters to self-classify whether their products are ‘mass market’, subject to registration and annual reporting requirements that enable the regulators to manage the limited risks in a proportionate, light-touch way. Pressure is building on the UK government to adopt a similar approach.
In parallel, the European Commission is continuing to work on proposals to revise the EU Dual-Use Regulation. These are likely to include new EU General Export Authorisations (equivalent to the UK’s OGELs) for a range of products and transactions including on encryption products. The Commission’s aim is to reduce both the licensing burden on exporters and distortions of competition that may arise from differences in licensing practices between Member States. But the shape and timing of these proposals remains unclear, and changes to the UK system seem likely to go ahead first.
What does this mean for you and how can Dechert help?
The new OGELs will significantly reduce the administration required for the export licensing of a large volume of military and dual-use components. If you are an exporter of goods which may come within their scope, you should study the licences to determine whether your goods are covered and whether you can meet the conditions set out in the licences. If that is the case, you may register to use the licence(s) on the ECO’s online applications system, SPIRE, and begin exporting under the licence(s) immediately. If as a result some of your existing individual licences will no longer be needed, you should surrender them to the ECO.
Dechert has unique expertise in helping our clients to achieve full compliance with export controls and sanctions (US as well as UK, EU and 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.
1) Annex I of Council Regulation 428/2009
2) In particular, Note 3 (‘the Cryptographic Note’) of Category 5 Part 2 of Annex I of Council Regulation 428/2009