Examination of Witnesses (Questions 31
TUESDAY 10 NOVEMBER 1998
A SHARMAN, MR
B SALZMANN, MR
D EVANS, MR
N PREST AND
MR D GARLAND
31. Good morning. Mr Prest, could you introduce
your colleagues please?
(Mr Prest) Good morning. I am the Chairman of a company
called Alvis which is in the business of manufacturing military
vehicles. Major General Alan Sharman on my left is the Director
General of the Defence Manufacturers' Association. Brinley Salzmann
is from the DMA and the closest we have to a technical expert
on the subject on which you want to make enquiries of us. On my
right is Mr David Evans who is the Managing Director of a company
called Chemring Group. Mr Douglas Garland is the Managing Director
of a company called RBR. Both of these gentlemen have extensive
experience and experiences of the export licensing system.
32. Thank you very much. It is interesting that
we have already had people this morning giving us evidence about
concerns which in effect would slow the process down. The burden
of some of your evidence would suggest that you feel the time
limits for the handling of ELAs are too long. You pointed to the
American and the French experience. What is the response to the
views which you have been advancing about the possibility of accelerating
the time taken so the applications could be dealt with more quickly?
Have you any concerns that in some respects the quality of the
scrutiny might diminish as a consequence of the speed with which
they would be handled? Is that a source of concern for you?
(Mr Prest) May I say at the outset that as a team
we welcome the opportunity to give evidence to your Committee?
We welcome the White Paper. Industry as a whole is entirely cognizant
of the fact that the business of the export of defence equipment
needs to be controlled. It is a proper subject for Government
and nobody in industry I have ever met has quarrelled with that
fundamental precept. We welcome the White Paper as an opportunity
to draw out some of these issues and to clarify certain features
of the way the export licensing system is operated for the future.
Our concerns rest primarily on the process itself, although we
have some other points to make. In that respect our concerns about
the process are fundamentally that the rules need to be clear,
that the licence process itself needs to be transparent and efficient,
including with respect to time limits, and that it should be at
the lowest possible cost to all concerned, industry and Government.
On the specific question of time limits, I am not aware, perhaps
my colleagues will chip in if they think otherwise, of any detailed
response we have had from Government on the suggestions which
have been made for a time limited process under which a licence
would be deemed to be issued by default. It is dismissed relatively
summarily in the White Paper without any extensive argument as
to the pros and cons of it. Our concern is that the current system
essentially lends itself to risk of abuse by Government, taking
longer to consider some of the issues than is necessary. We do
not think that the risk of decisions not getting proper scrutiny
would be increased by the process of having a time limit because
of two points. One is that it would probably serve to drive a
streamlining of the process in other ways, in other words, the
way that licences are applied for, the categories of equipment
and countries which are capable of being covered by open general
licences or by a more routine sort of system. To have a timetable
would perhaps actually oblige the authorities to streamline some
of the rest of the decisionmaking which is relatively routine
so as to enable them to concentrate on more difficult cases. At
the moment the system, we would argue, does not discriminate as
well as it should between the very high percentage of business
which should be uncontentious in policy terms and the small percentage
of business which does raise concerns. Our general view on that
would be that no, we do not see the quality of decision making
should be adversely affected by it. There could obviously be some
exception to the rule whereby the Government is capable of extending
the time process in certain cases. There would inevitably have
to be a get-out of that sort.
33. Form 680 has something like a 90 per cent
chance of being accepted. In April, Mr Evans, you gave evidence
to the joint inquiry and said that your company, Chemring, had
come through that hurdle only to find you were knocked out by
another means. Could you expand on the nature of the application
and the difficulties you had? I am interested in this as an example
of the system apparently not quite working or alternatively working
rather well because you were thwarted in doing something which
perhaps needed closer scrutiny.
(Mr Evans) Chemring is a PLC with a turnover of about
£80 million; not a big company but we export over 70 per
cent of our business. Sixty per cent of our business is defence,
the other part of our business is in marine safety. We are international
market leaders in marine safety under the name of Pains-Wessex.
We are market leaders in military pyrotechnics. We supply UKMOD
with at least 90 per cent of their pyrotechnic requirements in
competition. We are also market leaders in expendable countermeasures
for the protection of platforms from missile attack and radar
seeking. Over the last 12 months we have applied for 140 export
licences. If you go on to the DTI web site, question 13 asks how
long it will take to get an export licence. It says that you should
allow a minimum of four weeks for the application to be processed.
The export control organisation aims to issue licences within
ten working days, where we do not need the advice of other government
departments or 20 days where we do. Our experience is that four
per cent are within 20 days, 80 per cent greater than 30 days,
40 per cent greater than 50 days and 14 per cent greater than
100 days. The longest is one for 377 days, which is the export
licence to which you referred. One of the problems we have is
a total lack of understanding for the type of products which we
supply. We do not get multi-million pound contracts: we get tens
of thousands, a hundred thousand, maybe a couple of million pounds.
We are not high profile: aircraft, ships, missiles, radar systems.
The device in question had the word "grenade" attached
to it so the alarm bells go up. It was a device which was used
for startling terrorists in anti-drug situations by making a bang
and a flash. The payload itself is constrained from moving away
from the body by a cord so it cannot move any further away than
one metre. It goes bang, flash and it does disorientate you. We
explained all of that to DESO you go to the marketing desk at
DESO first. You say that you have a customer and before you spend
any more marketing time visiting and developing the customer these
are the type of products you want to go for. It costs a lot of
money to cross the Atlantic, stay in hotels.
34. To whom were you selling this?
(Mr Evans) This was to Colombia. We got a form 680
and we went through the process. Once we got the 680 form we accepted
the inquiry from the customer, we gave them a price in competition
and then we applied for the export licence. I can show you enormous
correspondence right up to Tony Lloyd, also copies to the head
of DESO. The export licence is still in the Foreign Office awaiting
a decision. I have lost the business to a competitor but then
a lesson has been learned. In our particular case, there does
not seem to be enough awareness for the type of products which
we supply. I fully support open export control; I really fully
support it but once it goes into the system ... In fact I do not
believe that the problem is with the Department of Trade, once
it goes into the Foreign Office it seems to go into this black
hole where you cannot talk to people and you do not get any feedback.
We have no end date on when we can get a response and we have
little initiative to try to understand the type of product we
are trying to export. At the other end you have a customer who
is asking you whether you are going to supply, when you are going
to supply. It is quite infuriating and there is no independent
appeal process where you can get to the nub of what the problem
35. Could you provide us with the correspondence
you have had?
(Mr Evans) Yes; most certainly.
36. It would be helpful, not necessarily pursuing
your individual case, there are other ways of doing that, but
just as an example of the clogging up of the works certainly this
seems to be quite a useful example.
(Mr Evans) I understand. I did not want to pick up
this particular example, it was just a general lack of feedback
and lack of knowledge of when an export licence is going to come
out which frankly does not allow us to carry out our business
in a commercial professional way.
37. Is it just a judgement you have madeand
let us use this as an example because perhaps it is a pretty good
example given the length of delay involved? Have you just reached
a subjective view that you think it is held up in the Foreign
Office as opposed to the DTI? Do you have any evidence to back
(Mr Evans) It is a judgement based on the amount of
lobbying, questions of a variety of individuals and personalities
and I have come to the conclusion that is where the problem is.
38. In the DTI there are people who specialise
in certain technical aspects. It might be something a bit bizarre
and unusual but as I understand it there would normally be a fairly
rapid communication, either verbally, or exchange of correspondence,
if necessary perhaps under rare circumstances an actual visit
out to meet with your company's technical experts who have designed
this particular piece of kit to get a better understanding. Was
that all undertaken in this case?
(Mr Evans) The DTI have gone out of their way to understand
the product. The DTI have been very supportive.
39. Obviously alarm bells sound everywhere,
do they not? Three hundred and seventy-seven days is absolutely
not acceptable. You say this was just a grenade and that may be
what sounds the alarm bells. Could it have been put to dual use
in any way or could there be any other view than what you have
told us today that could possibly hold it up in the Foreign Office?
Or is it that you believe there is not the expertise in the Foreign
Office to understand what you are exporting?
(Mr Evans) I cannot answer that question on whether
there is expertise in the Foreign Office or not.