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Select Committee on Trade and Industry First Report


9  ORGANISATIONAL AND ADMINISTRATIVE ISSUES

Export Control Organisation

291. We visited the Export Control Organisation at the Department of Trade and Industry, now the Department for Business, Enterprise and Regulatory Reform, in March. We were briefed by the Minister of State for Science and Innovation, Malcolm Wicks MP, and senior officials and met staff in the Export Control Organisation (ECO) processing applications for export licences as well as having a demonstration of the SPHIRE IT system.[395] We found the visit useful and informative.

292. In our Report last year we reported on the ECO's performance in 2005. EGAD had been complimentary about the improvements in the time ECO took to determine applications for licences.[396] When it gave evidence this year we asked about the service EGAD's members had received from the ECO in 2006. EGAD considered that the ECO had maintained a good performance during 2006.[397] The 2007 Consultation Document stated that figures showed that the percentages of Open Individual Export Licence (OIEL) applications processed within their target time of 60% within 60 working days increased from 64% in 2004 to 74% in 2006, and those for Standard Individual Export Licence (SIEL) applications (where the target is to process 70% within 20 working days) increased from 79% in 2004 to 82% in 2006.[398] EGAD, on behalf of UK industry, warmly welcomed these figures, which it believed were the best ever achieved, and congratulated all of those within Government who had made this possible though their hard work.[399] We add our congratulations to the ECO on achieving this performance.

293. We do, however, add a word of caution. We accept that the speed with which licences are turned around is important, particularly for industry. But other performance indicators are crucial to ensure effective outreach controls: the number of compliance visits, outreach to UK industry and outreach and assistance to third countries.

ECO'S WEBSITE

294. The only issue of concern to EGAD's members was ECO's website[400] which had, in the view of many companies, "been significantly downgraded in its user friendliness and accessibility".[401] EGAD considered that

    Whilst the ECO's website used to be […] amongst the best in the World, invaluable, full of easily-accessible information about our export control system and highly user-friendly, this is, sadly, no longer the case, and much searching is now required to find the documents which are needed, which are all still there, but not easy to find (especially for the uninitiated). This retrograde step, which represents a triumph of corporate branding over functionality, is deeply regrettable.[402]

295. ECO is aware that a number of people have found its section of the Department for Business, Enterprise and Regulatory Reform's website difficult to navigate. The Government said that the ECO was working with those responsible for the Department's website to try to address these criticisms.[403] Having used the website for several years we share EGAD's concerns about the deterioration in the usefulness of the ECO website. We recommend that the ECO review and modify its website to make it easier to use.

WMD PUBLICATIONS BY THE ECO

296. Miss Kidd and Dr Hobbs in their memorandum urged that an "emphasis should be placed on efforts to prevent the inadvertent transfer of seemingly innocuous goods to entities which may then re-export UK goods (and possible intangible transfers such as designs and software) to states of proliferation concern". They identified front companies and re-exports as difficult to control. They noted that

297. We concur with Miss Kidd and Dr Hobbs. We conclude that the Export Control Organisation has a key role to play in preventing inadvertent transfer of goods and technologies which can be used in weapons of mass destruction. We recommend that the ECO publish and regularly update Guidance on the Operation of the WMD End-Use Control, including lists of suspected front companies.

Outreach: UK

298. In our Report last year we concluded that outreach to UK industry was critical to the operation and control of strategic exports and we recommended that the outreach programme be expanded significantly.[405] In reply the Government welcomed the Committee's comments on the value of outreach to UK exporters and pointed out that the ECO had been running a number of very successful events around the UK raising the awareness of current exporters and also informing those new to export control and licensing. These events had been well attended and received. However, with the current constraints on resourcing and, with possible further cuts to come, the Government could give no guarantee that the same level of events and awareness could be maintained in the long term.[406]

299. One of the lessons which Dr Bauer and Ms Wetter identified from examination of prosecutions in other European countries was that a joint strategy across government departments and agencies for outreach to industry provided the most effective approach within the enforcement community.[407]

300. The evidence we received this year has strengthened our conclusion that we made in our Report last year that outreach to UK industry is critical to the operation and control of strategic exports. We are convinced that without a comprehensive programme of outreach the risk of dual-use goods falling—through inadvertent transfers—into the wrong hands will increase. If preventing such transfers is a priority for Government, it will have to find the resources to expand its outreach programme. We recommend, as we did last year, that the outreach programme to industry be expanded significantly.

5 year open individual export licences

301. We asked the Government how many OIELs with terms of five years or longer were issued in 2005 and 2006. It replied:

302. On the basis of the figures supplied the proportion of OIELs with a term of five years or more has increased from 67% in 2005 to 87% in 2006. By any reckoning this is a significant increase. To ensure that the export control system maintains its integrity we conclude that the holders of OIELs with terms of five years or longer must be subject to regular compliance checks and we recommend that in its reply the Government explain the extent to which the holders of such licences are subject to compliance visits and checks.

Export enforcement agency

303. We put to HM Revenue and Customs (HMRC) the suggestion made by Mr David Hayes that there should be a single export compliance agency drawing together the DTI, now the Department for Business, Enterprise and Regulatory Reform, and HMRC which would focus exclusively on implementing export controls.[409] HMRC commented:

    looking at it purely in terms of the implementation from a customs point of view, looking at the advantages and disadvantages […] is quite easy to get carried away […] in any area of operational difficulties that Departments face to suggest "Let's have an agency to solve that problem". You have to look quite critically at what setting up an agency would do differently and how it could be made to be more effective compared with the status quo because, on the face of it, creating an agency does not itself create any additional resources. Indeed, it makes it quite difficult to get even the existing level of resources you have got because you have got to denude large multifaceted teams, particularly in Revenue and Customs, which are working together across a number of issues at the same time because it makes sense to do so. You have to take the resources out of that and get the central overheads for the agency.[410]

    One of our particular concerns […] is that without having a multifaceted team you have not got quite the same ability to react quickly.[411]

304. We found the points HMRC made against the creation of a single enforcement agency to be cogent. We cannot see that the creation of a single enforcement agency is going to overcome the operational difficulties that are currently faced such as the difficulty in obtaining evidence from overseas to put before a UK court. On the basis of the evidence put before our inquiry we conclude that there is no overwhelming case in favour of setting up an export enforcement agency.

Monitoring of imports

305. For the first time this year we raised with the Government the controls on imports of weapons into the UK. Our concerns focussed on the large volume of assault rifles which came into the UK from the former Yugoslavia. The DTI's (now the Department for Business, Enterprise and Regulatory Reform's) Import Licensing Branch issues licences for the import of firearms and ammunition and the Government explained that import licences were only granted to those with domestic authority to possess firearms under the Firearms Act 1968, as amended, and that the import licensing regime backed up domestic controls on firearms possession, which were the responsibility of the Home Office.[412]

306. Between 2003 and 2005 import licences which specifically referred to assault rifles were issued as follows:

2003 — 40 licences covering 6,220 assault rifles;

2004 — 16 licences covering 226 assault rifles; and

2005 — 40 licences covering 194,659 assault rifles.

During the same three years, the ECO issued Standard Individual Exports Licences (SIELs) covering assault rifles as follows:

2003 — 43 SIELs allowing the export of 1,202 assault rifles;

2004 — 47 SIELs allowing the export of 2,205 assault rifles; and

2005 — 56 SIELs covering 2,502 assault rifles.

307. In addition, the Export Control Organisation also granted six Open Individual Export Licences (OIELs) during this period for the export of broad categories of weapons which could include assault rifles. The Government explained that one of these was a temporary OIEL for film production purposes and that the remaining five were for exports to countries with rigorous firearm control regimes.[413] As OIELs are not normally quantity limited it was not possible for the Government to state precisely how many assault rifles (if any) had been exported under cover of these OIELs. The Government assured us, however, that, before any OIEL was granted, a range of factors were taken into account, including the items to be exported, the destinations, the Consolidated EU and National Arms Export Licensing Criteria, and that the exporter had the relevant authorisations to hold firearms in the UK. It added that the ECO also carried out regular audits of OIEL holders to ensure that they were complying with the OIELs and any particular conditions applied to them.[414]

308. More specifically on 20,000 assault rifles imported from Bosnia in May/June 2005 the Government assured us that the import procedures had been fully complied with and that checks had been carried out. It pointed out that the removal of weapons from the former Yugoslavia had been an agreed objective of both NATO and the UN, which was fully supported by the UK. The UN Development Programme has been active in running a programme for the destruction or removal of weapons from the former Yugoslavia, and NATO had also played its part in arms reduction in the region.[415]

309. We asked HMRC about the checks made on imports. It told us that:

    There is a 100% check on commercial imports of firearms […] Officers have some discretion over how they execute that. If they regard the importer as a well known, regular shipper through their port, they may confine that to a documentary check, but they have the discretion to physically examine the goods and to count them. Supplementing that we have a small team of officers who work throughout the UK called Firearms and Explosives Officers whose job is to audit the books of registered firearms dealers with particular regard to declared imports. We have the frontier control backed up by a deeper audit that takes place of all registered firearms dealers, registered to hold section five firearms, which is exactly what these assault rifles would be. They undertake a number of audit checks. They check that all imported goods have been entered into the firearms register.[416]

310. While we took some comfort from the evidence supplied by the Government, no comprehensive account of the 200,000 assault rifles that were imported between 2003 and 2005 was provided. Our concerns focus on two issues. First, to be told by that Government that "the purpose of the DTI's import controls on firearms is to provide a back up for domestic controls on possession" concerns us. It appears that in contrast to the export regime, the import licensing regime may contain little scrutiny and cross-departmental checking and that licences are issued largely as a matter of course to registered firearms dealers. Given the volume of assault weapons coming into the country we consider that there must be adequate monitoring arrangements to ensure none of these weapons leak onto the streets of the UK and that, if they are part of a weapons destruction programme, they are made unusable. Second, if imported weapons are re-exported they pass through two separate sets of controls each operated by the DTI and HMRC: import and export controls operated by HMRC at the ports of entry and export; and a requirement for import and export licences from the DTI (now the Department for Business, Enterprise and Regulatory Reform). HMRC explained to us that it was not "counting […] out" the imports.[417] We saw no clear evidence that the functions within the respective departments joined up to track the assault rifles or that these departments worked closely together, or with the Home Office, to monitor these large volume of assault weapons. We recommend that the Government improve the arrangements for monitoring and controlling large volumes of weapons that enter the UK for destruction or re-export. In addition, we recommend that the Government provide a full account of the 200,000 assault rifles that were imported into the UK from the former Yugoslavia between 2003 and 2005, explaining how many were made unusable and how many were re-exported.

Defence attachés

311. Following press and other reports we raised the possibility of reductions in the numbers of defence attachés with the then Foreign Secretary. She replied: "I am sure everybody realises, it is going to be a stretching public spending round and in the FCO we have to look very carefully at what are going to be very limited resources and make the best possible use we can of them".[418] She added "in our own department very much reprioritising, beefing-up our posts in areas where we believe the challenge and need will be greater in the future and in consequence reducing areas where it would be enjoyable, comfortable, to continue to maintain posts at the level we do".[419]

312. Whilst we appreciate the serious pressures on budgets, we took little assurance from the Foreign Secretary's response and we are concerned that UK defence attaché posts may be cut, particularly in countries where the export of goods and technology from the UK requires careful consideration to ensure that they meet the EU Code of Conduct on Arms Exports and the National Export Licensing Criteria. In responding to our Report last year the Government said that the UK Overseas Posts had standing instructions to report any misuse of UK-origin defence equipment.[420] We consider that defence attachés provide an essential role in the assessment of applications for export licences and also in checking on end-use. We recommend that the Government do not cut defence attaché posts in countries where the export of goods and technology from the UK requires careful consideration to ensure that they meet the EU Code of Conduct on Arms Exports and the National Export Licensing Criteria, and in countries where the UK and other members of the international community are assisting in the destruction of surplus conventional weapons and WMD materials, or where there are concerns about the exporting of such surplus weapons and materials.


395   SPIRE is the Export Control Organisation's new fully electronic system for processing licence applications. When it goes live in September 2007, it will replace all the methods currently in use to apply for any of the licences processed by the Export Control Organisation within the DTI - http://www.dti.gov.uk/europeandtrade/strategic-export-control/spire/index.html. Back

396   HC (2005-06) 873, para 55 Back

397   Q 33 Back

398   2007 Consultation Document, para 1.1.4 Back

399   Ev 69 Back

400   http://www.dti.gov.uk/europeandtrade/strategic-export-control/index.html  Back

401   Q 34 Back

402   Ev 57 Back

403   Ev 104, para 14 Back

404   Ev 130 Back

405   HC (2005-06) 873, para 69 Back

406   Cm 6954, p13 Back

407   Ev 137, section 4 Back

408   Ev 111, para 15 Back

409   Ev 153 Back

410   Q 145 Back

411   Q 146 Back

412   Ev 98 Back

413   Ibid. Back

414   Ibid. Back

415   Ibid. Back

416   Q 195 Back

417   Q 196 Back

418   Q 223 Back

419   Q 225 Back

420   Cm 6954, p 22 Back


 
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Prepared 7 August 2007