STRENGTHS AND WEAKNESSES OF THE ANNUAL REPORT

1.   Strengths of the Annual Report

  As outlined above, the Annual Report is an important step toward greater transparency and accountability in strategic export controls. BASIC has identified three key strengths in the Annual Report.

  1.1  Fulfilling political commitments: The most significant strength of the Annual Report is the fact that it exists at all. The report provides testament to the UK Government's willingness to realise its pre-election commitments and increase accountability and transparency both in Government and in arms trade. Production of an Annual Report demonstrates a recognition that the NGOs, the media, parliamentarians and, above all the public have a right to know what weapons are being sold and to whom. Furthermore, the production of an Annual Report underlines this Government's commitment to the Anglo-French initiative for an EU Code of Conduct on Arms Export.

  1.2  First steps towards a comprehensive report: The report provides an important first step toward comprehensive and detailed reporting on arms exports. As well as covering the four main types of licences, the report provides information on transfer on a country by country basis and, in most cases, includes a listing of the specific equipment under approval.

  1.3  Measuring Government policy against Government practice: By including details of the UK Government's current policy, political agreements and international commitments on arms exports as well as licensing information, the reader is able to measure current policy against current practice.

2.   Weaknesses of the Annual Report

  As Government's officials have themselves acknowledged, this report is not as comprehensive or as detailed as it could be. In part this is understandable, as the DTI licensing and information systems are understood to have required significant updating and re-organisation in order to produce this first Annual Report.

  However, the Annual Report has several serious weaknesses, which must be addressed, before the 1998 report is produced. These weaknesses relate both to the information made available in the report, and the policy governing licensing decisions. During this review period, it is critical that the UK Government continues to assess these weaknesses and works to address them.

2.1  Improvements required in licensing details

  BASIC believes it is in the best interest of the UK Government to provide as detailed and specific information about monetary value and quantity of weapons transferred as possible. The significant omissions outlined below result in the public, the media and NGOs assuming the "worst case scenario", that is, that the largest amount of the most lethal weapons have been transferred. Obscurity will only lead to suspicions of deliberate obfuscation.

Discrepancies in level of reporting detail: The Annual Report provides information on all four main types of licences (see Box 2). However, there is a large discrepancy between the amount of detail provided for the Standard Individual Export Licences (SIELs) and the Open Individual Export Licences (OIELs).

 

BOX 1: MINIMUM STANDARDS OF REPORTING: THE UNITED STATES SECTION 655 REPORT   Since 1996, the United States has been required each year, under Section 655 of the Foreign Assistance Act of 1961, to provide an account of authorisations for US weapons transfers from the previous year. This report contains a country-by-country, weapon-by-weapon listing of all the major channels of weapons transfers covering: —  direct commercial sales approved for export; —  foreign military sales (Government to Government sales): —  sales or grants of excess defence articles (government surplus); —  international military education and training; and —  grants of military equipment or services for "unforeseen emergencies".   The report also covers all military items manufactured abroad, which the US government has imported in the previous year.   The first report, covering 1996, was prepared jointly by the US State Department and the US Department of Defense. Subsequently, the two Departments have developed their own individual reports, with the State Department releasing information about commercial authorisations, and the Department of Defense releasing information about Government to Government transactions.   The US Section 655 report represents the minimum standard in reporting on strategic exports as it contains in-depth, comprehensive and unambiguous information required for transparent reporting. Not only does the Section 655 Report provide a wide scope of information (including all the different types of transfers listed above) it also covers these transfers in great depth. Most notably, the Section 655 contains, in country by country format: —  Details of each item authorised for export or (in the case of foreign military sales) actually exported, as opposed to simply a military list classification; —  Quantity of each item authorised or exported; —  Dollar value of each item; —  Dollar value of any manufacturing licence or technical assistance agreements undertaken, The US government has promised that in the future, with updated computer software, more details will be provided on these agreements. It should be noted that inclusion of this information has been done voluntarily by the US government, as it is not required by Section 655.   One of the main criticisms of the Section 655 report is that, like many other country reports, it only includes information about transfers that have been authorised and does not specify which of those authorised commercial transfers has actually been delivered.

  For OIELs, only the military list (or dual-use goods) category, eg ML1 or PL5021, is given for each licence awarded, whereas for SIELs a breakdown is provided of which specific goods have been authorised for transfer. This is of vital importance considering the broadness of the military list categories. For example, the category ML10 includes everything from parachutes to combat aircraft. Thus, when examining the OIELs it is unclear whether the UK has exported aircraft or parachutes to India.

  Furthermore, the section covering OIELs contains no information on licence refusals, leaving the reader with the impression that all licences were granted. If this is the case, it should be stated unequivocally rather than leaving the reader to speculate. It is worth noting that OIELs are granted subject to the following specific control criteria:

—  the export of goods cannot be associated with weapons of mass destruction or missiles for the delivery of weapons of mass destruction;

—  all consignees must provide an end-user undertaking stating that shipments are not intended for re-export to a non-eligible destination, preferably before the shipment, and by the latest one month after;

—  the OIEL number must be quoted on documentation accompanying the export;

—  the company issued with an OIEL must maintain records of all shipments made under its authority, and make these records available to DTI representatives. These records must contain a description of the goods, the quantities exported, name and address of the exporter, name and address of the consignee (where known), details of their end use and the end-user.

  This would suggest that companies make more precise information available to the DTI. It is unclear why this information is not included with the Annual Report. This information is just as important for the OIELs as for the SIELs.

—  Recommendation: While the level of information provided for the SIELs in this Annual Report is not detailed enough (see below), the level of information provided for OIELs should be consistent with that for SIELs where possible. Where this is not possible, this should be explained, on a case by case basis.

  Missing information: monetary values of licences: In all licence categories, the Report fails to provide information on the monetary value of each item (or group of identical items) covered by any licence, either granted or refused. This applies to both the military list goods and the dual-use goods. While aggregate sums are given for the actual export of equipment, these figures do not assist in providing a picture of the value of the many different licences awarded in the given year.

—  Recommendation: In line with the US Section 655 Report (see Box 1), the next Annual Report should include precise details of the monetary value of each item (or group of items) for every licence granted and refused.

  Missing information: quantity of goods: For all licences, the Annual Report fails to specify how many items (both military and dual-use) will be transferred under each licence that has been approved for export, making it impossible to assess the quantity of equipment transferred.

—  Recommendation: In line with US Section 655 Report, the next Annual Report should detail the quantity of equipment approved for export for each licence.

  Missing information: details of dual-use goods: Although for SIELs, details of the exact items granted a licence from the military list is specified, the same details are not available for licences for dual-use goods. Furthermore, for OIELs, no details of either military list or dual-use goods granted licences are specified. Moreover, in the dual-use category, although codes are given, there is no annex to describe what each category represents.

—  Recommendation: In the next Annual Report, in order to improve transparency and accountability, descriptions of the categories of dual-use goods (Schedule 2 to the Dual-Use and Related Goods (Export Control) Regulations 1996) must be included as an annex to the Annual Report. This is already the case with the Military List. Details of each item should also be provided next to each licence approved.

  Missing information: details of exports made under OGELs: Although OGELs are generally regarded as covering the least sensitive goods, not enough information is provided in the Annual Report concerning these exports. However, within the Annual Report, 20 OGELs are listed as "relevant". This would imply that OGELs are strategically important in the scheme of military and dual-use goods. No details, even summary ones, are given on the nature of each OGEL, other than a title and dates. No account is given in this section about the goods that have been exported under these licences. Presumably these exports (at least the military equipment) are accounted for in the aggregation of physical exports given at the end of the Report. However, without a breakdown in that aggregation, it is not possible to see which goods have been exported using these licences (see 2.2).

—  Recommendation: In the next Annual Report, summary explanations should be given for each type of OGEL.

  2.2  Assessing licences approved against the actual delivery of equipment. Checking licences approved against the actual delivery of goods is a vital way for the public and parliamentarians to gain an accurate picture of the nature and the scale of the UK arms trade each year. Regrettably, this first Annual Report has failed to provide consistent information in this area.

  The categories outlining licences approved and denied are drawn from the UK Military List and List of Dual-use Goods. In contrast, the table entitled Statistics on Exports of Military Equipment (Table 8, page 113), which details the actual export of military equipment in 1997, is drawn from UK data transmitted yearly to the UN Register on Conventional Arms. The UN Register only covers seven very broad categories of conventional arms. The one area that is not covered by the UN Register is that of small arms and light weapons; for this category the Annual Report used data culled from HM Customs and Excise. Furthermore, although the time period for the licence authorisations and actual exports is similar, many licences are valid for up to three years, thereby frustrating attempts to match licence authorisations with actual exports.

—  Recommendations: In the next Annual Report, a "counter-check" system should be included, in a format that allows for easy comparison between authorisation and actual export. Next to each licence approved, information should be provided about what shipments on that licence have been made. An annex should then also list the licences that had been approved in the preceding two years stating whether any shipments had been made on those licences.

2.3  Problems and inconsistencies with the Statistics on Exports of Military Equipment

  A further problem with the Statistics on Exports of Military Equipment is that if fails to make any distinction between commercial exports, Government to Government contracts, and sale of surplus defence equipment. It remains unclear whether Government to Government sales are included in this table of statistics. Another problem is that for each country, only an aggregate monetary figure is given for the total of all the exports. There is no breakdown of value for each good, or even category of goods.

—  Recommendation: In the next Annual Report Statistics on Exports of Military Equipment should be more detailed and comprehensive. As recommended above, information on licence approvals and actual exports should be made more consistent. Commercial export information should be separated out from Government to Government exports.

2.4  Problems with Information Sources

  As explained in the Annual Report, using HM Customs and Excise information has been problematic for a variety of reasons. Different data sources are used depending on whether the export went to EU partners (Intrastat system) or elsewhere (customs declarations). Intrastat does not require exporters to report how many items were transferred under EU Tariff Code 9301 0000. This Tariff Code covers Military Weapons—artillery weapons, continuous rapid-fire weapons, rifles and carbines, and other projectile weapons.

  Furthermore, the Annual Report admits that the HM Customs and Excise is not suitable for the purpose of collecting small arms information as:

"the system under which the data is collected is not specific to defence exports . . . and its primary use has been for the compilation of statistics on overall levels of UK trade. This has created some difficulties in extracting from this source the type of data required for this report." (page 111, Annual Report).

  This is partly because EU Tarrif Codes are used by HM Customs and Excise, and a number of categories of goods on the UK Military List are not covered by EU military Tariff Codes. For example, the majority of security and para-military police goods do not appear on military EU Tariff Codes. The Report goes on to state that:

"the figures for the value of exports by country will not include the values of a number of categories of defence equipment which are controlled on the UK Military List." (page 115, Annual Report).

  A further problem with using UN Register information for certain kinds of weapons transfers, and HM Customs and Excise information for other types, is that they define "export" in different ways. The UN Register interprets an export as having taken place when the title of the good has been transferred, while the HM Customs and Excise bases their data of exports on the physical movement of goods. Countries may appear to be in possession of weapons, when they have only received the title of good.

—  Recommendation: According to the Annual Report, the HM Customs and Excise data is the "only available source of Government information on the value of defence export deliveries or on quantities of equipment exported, other than major exports." It seems though, that if information on licences/actual exports (as recommended in 2.2) is to be provided in subsequent Annual Reports, a different system of collecting information will need to be devised. A starting point would be to require exporters to provide the Government with notification of shipment. BASIC believes that it is vital that accurate data on exports, linked with licence authorisations, must be developed.