ARTICLE

June 2004

Government Policy Notes

How U.K.’s New Export Control Act Will Hit U.S. Firms

by Brinley Salzmann

Significant modifications to the United Kingdom’s export controls went into effect in June, almost a decade after a major public inquiry into the alleged sale of defense and dual-use technology by British firms to Iraq prior to the 1991 Gulf War. The changes stem from the U.K. Export Control Act of 2002, which seeks to address perceived inadequacies in the country’s current export control system. Among other things, the new regulations impose additional controls in the following areas:

• The intangible transfer of technology.
• The provision of technical assistance relating to weapons of mass destruction.
• Trade activities (trafficking and brokering).
• The new legislation has resulted in a major culture change for affected British firms trying to come to grips with the regulations’ impact on their commercial activities.

During these meetings, companies were briefed on the implications of the new act for U.K. firms and what they needed to do to meet its requirements. Many non-U.K. companies, however, june not be aware that their activities, either while visiting the United Kingdom or employing British nationals in their workforce, even outside of the kingdom, could require them to comply with the law.

To help clarify the situation, DTI has placed all of the information related to the new regulations—with background guidance documents to assist companies to come to terms with interpreting the controls—on its Web site (www.dti.gov.uk/export.control).

Here is a brief summary of the requirements:

First, export-related commercial activity undertaken by overseas firms on business trips to trade fairs in the United Kingdom—such as the Farnborough International Airshow in July and the Defence Systems & Equipment International Exhibition in September 2005—will be subject to the new rules.

To be covered by the regulations, the goods involved must be on the British Military List, and a foreign company’s activities in the United Kingdom, for the most part, limited merely to the actual signing or negotiation of contracts.

The vast majority of normal commercial and promotional activity is unaffected, but overseas companies still should read the details very carefully to get a full understanding of what will be covered. In almost all cases, the foreign companies only need to register by writing to the DTI, using the Open General Trade Control Licence.

The extraterritorial aspects of the new trade controls affect any overseas firm which employs British nationals in relevant roles and is involved in the following sectors of export-related activity:

• Long-range (i.e. 300 km or more) missiles or their specially design component parts.
• Long-range unmanned aerial vehicles or their specially design component parts.
• Equipment that already has been banned for export from the United Kingdom based upon evidence of its use in torture, such as portable devices designed or modified for riot-control purposes or self-protection to administer an electric shock. This includes electric-shock batons and shields, stun guns and specially designed components for such devices; leg irons, gang-chains, shackles (excluding normal handcuffs) and electric-shock belts designed for the restraint of a human being.
• The export of controlled military equipment to a range of embargoed destinations, currently including Armenia, Azerbaijan, Bosnia, Burma (Myanmar), Congo, Iran, Libya, Sudan and Zimbabwe.

Another non-trade control-related issue that should not be overlooked is the impact of the new controls on the transfer of technology by any means related to weapons of mass destruction. That includes technology used in connection with the development, production, handling, operation, maintenance, storage, detection, identification and dissemination of chemical, biological and nuclear weapons, or other nuclear explosive devices, or the development, production, maintenance or storage of missiles capable of delivering such weapons.

Overseas nationals in the United Kingdom need to obtain licenses before entering into any technical discussions involving equipment or technology described above—even if those foreign company personnel simply are discussing technical issues with their colleagues in the kingdom or overseas, or with the Ministry of Defence.

Foreign companies with queries about the impact of the new legislation on their activities should contact the relevant department at DTI (e-mail: lu3.eca@dti.gsi.gov.uk) to discuss their licensing needs with them.

Brinley Salzmann is exports director for the Defence Manufacturers Association, NDIA’s sister organization in the United Kingdom.

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