2020 News Archive >>
Why is China Introducing New Export Controls?
The Standing Committee of the National People’s Congress will deliberate on China’s new export control law at a session starting Tuesday, October 13, 2020, with the goal of safeguarding national security interests and could ban Chinese suppliers from doing business with specific foreign companies. This law is expected to be enacted next year. Details are awaited on what will be the scope of these restrictions, what constitutes a threat to national security, guidance for firms to establish internal compliance mechanisms, and what happens in case export controls are violated.
Further Details – Why is China Introducing New Export Controls?
US National Strategy for Critical and Emerging Technologies
The National Security Strategy (NSS) lays out a vision for promoting American prosperity; protecting the American people, the homeland, and the American way of life; preserving peace through strength; and advancing American influence in an era of great power competition. It calls for the United States to lead in research, technology, invention, and innovation, referred to here generally as science and technology (S&T), by prioritizing emerging technologies critical to economic growth and security. The NSS also calls for the United States to promote and protect the United States National Security Innovation Base (NSIB), which it defines as the American network of knowledge, capabilities, and people – including academia, National Laboratories, and the private sector – that turns ideas into innovations, transforms discoveries into successful commercial products and companies, and protects and enhances the American way of life.
Full report – National-Strategy-for-CET
Paying Ransomware Demands May Violate Sanctions, US Treasury Warns
Never pay. Insurers and others are warned by US Treasury Dept that cyberattack payouts to hackers may violate US sanction rules
US officials have issued a stark warning to financial institutions and insurers who have paid hackers following cyberattacks…more
EU companies selling surveillance tools to China’s human rights abusers
European tech companies risk fuelling widespread human rights abuses by selling digital surveillance technology to China’s public security agencies, a new Amnesty International investigation reveals. The findings are published ahead of a crucial meeting in Brussels on 22 September where the European Parliament and EU member states will decide whether to strengthen lax surveillance export rules…more
I want to update the House on the steps that have been taken to comply with the judgment of the Court of Appeal of 20 June 2019 regarding licences for military exports to Saudi Arabia for possible use in the conflict in Yemen.
The legal proceedings concerned the decisions of the then Secretary of State for Business, Innovation and Skills of 9 December 2015:
- Not to suspend extant export licences for the sale or transfer of arms and military equipment to Saudi Arabia for possible use in the conflict in Yemen; and
- To continue to grant further such licences.
The legal proceedings concerned Criterion 2c of the Consolidated EU and National Arms Export Licensing Criteria – which requires the Government to assess Saudi Arabia’s attitude towards relevant principles of international law and provides that the Government will not grant a licence if there is a clear risk that the items might be used in the commission of a serious violation of international humanitarian law (IHL).
The Divisional Court found in favour of the Government in its judgment of July 2017, noting that we applied a rigorous and robust, multi-layered process of analysis to making our licensing decisions. Our approach has focused on a predictive evaluation of risk as to the attitude and future conduct of the Saudi-led coalition, recognising the inherent difficulties of seeking to reach findings on IHL for specific incidents where we do not have access to complete information. Even so, this analysis has always incorporated a detailed and careful review of past allegations of incidents of concern. This included analysis, to the extent possible, of whether there were patterns of concern, in particular arising from trends in the number of allegations of civilian casualties and of damage to key civilian infrastructure. The Court of Appeal broadly endorsed this decision-making process.
The principal issue in the Court of Appeal was whether this analysis needed to go further. In the Court’s judgment, the question of whether there was an historic pattern of breaches of IHL was a question which required to be faced. Even if it could not be answered with reasonable confidence for every incident, at least the attempt had to be made. It was because we had not reached findings on whether specific incidents constituted breaches of IHL as part of our assessment of clear risk, under Criterion 2c, that the Court of Appeal concluded that our decision-making process was irrational and therefore unlawful.
To address the Court of Appeal’s judgment, we have developed a revised methodology in respect of all allegations which it is assessed are likely to have occurred and to have been caused by fixed wing aircraft, reflecting the factual circumstances that the court proceedings concerned. Each of those allegations has been subject to detailed analysis by reference to the relevant principles of IHL and in the light of all the information and intelligence available. An evaluation has then been made, in respect of each incident, whether it is possible that it constitutes a breach of IHL or whether it is unlikely that it represents a breach. For a number of incidents, as envisaged by the Court of Appeal, there is insufficient information to make this evaluation. Where an incident is assessed as being a “possible” breach, it is regarded – for the purposes of the Criterion 2c analysis – as if it were a breach of IHL. By setting the threshold as “possible” the IHL analysis has captured the widest range of relevant potential IHL breaches, to provide a base from which to assess the prospective risk for Criterion 2c.
The IHL analysis has now been applied to all credible incidents of concern of which we are aware. Some of these incidents have been assessed as “possible” violations of IHL. These have therefore been factored into the overall Criterion 2c Analysis on the basis that they are violations of IHL.
We have sought to determine whether these “violations” are indicative of:
(i) any patterns of non-compliance;
(ii) a lack of commitment on the part of Saudi Arabia to comply with IHL; and/or
(iii) a lack of capacity or systemic weaknesses which might give rise to a clear risk of IHL breaches.
We have similarly looked for patterns and trends across the incidents which have been assessed as being unlikely to be breaches of IHL and those for which there is insufficient information to make an assessment.
This analysis has not revealed any such patterns, trends or systemic weaknesses. It is noted, in particular, that the incidents which have been assessed to be possible violations of IHL occurred at different times, in different circumstances and for different reasons. The conclusion is that these are isolated incidents.
I want to emphasise that the IHL analysis is just one part of the Criterion 2c assessment. In re-taking these decisions, I have taken into account the full range of information available to the Government. In the light of all that information and analysis, I have concluded that, notwithstanding the isolated incidents which have been factored into the analysis as historic violations of IHL, Saudi Arabia has a genuine intent and the capacity to comply with IHL.
On that basis, I have assessed that there is not a clear risk that the export of arms and military equipment to Saudi Arabia might be used in the commission of a serious violation of IHL.
Having now re-taken the decisions that were the subject of judicial review on the correct legal basis, as required by the Order of the Court of Appeal of 20 June, it follows that the undertaking that my predecessor gave to the Court – that we would not grant any new licences for the export of arms or military equipment to Saudi Arabia for possible use in Yemen – falls away. The broader commitment that was given to Parliament, relating to licences for Saudi Arabia and its coalition partners, also no longer applies.
The Government will now begin the process of clearing the backlog of licence applications for Saudi Arabia and its coalition partners that has built up since 20 June last year. Each application will, of course, be carefully assessed against the Consolidated EU and National Arms Export Licensing Criteria and a licence would not be granted if to do so would be a breach of the Criteria. It may take some months to clear this backlog.
Finally, as indicated in the statement made to the House on 20 June 2019, we sought permission to appeal to the Supreme Court against the Court of Appeal’s judgment. Permission was granted by the Court of Appeal on 9 July 2019. In light of the revised methodology which I have just described, I will now be taking steps to withdraw this appeal.
See online here
US BIS – Tightening Restrictions on Exports to China, Russia and Venezuela
Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People’s Republic of China, Russia, or Venezuela. Final Rule. (85 FR 23459) (April 28, 2020)
Current Export and Trade Control Licensing Delays
As many UK companies are already aware, the UK Government has been working hard to try to address the current delays that are being widely experienced with the UK export and trade control licensing system. The situation is extremely challenging for all involved, and is fundamentally a knock-on from the 20th June 2019 Appeal Court ruling (on the Kingdom of Saudi Arabia and its coalition allies in Yemen) and the 15th October 2019 Ministerial announcement to Parliament (on licences for Turkey). ECJU is well aware of the issues that have been caused for companies, as a result, and the intense frustration that many of you are experiencing. The good news is that it is anticipated that ECJU should be able to start clearing the backlog in the near future, which will likely take at least c.3 months.
However, in the meantime, and to assist the Government in its efforts to work its way through the backlog in a rational, thoughtful and strategic way, it has requested help from Industry to try to prioritise its efforts, and focus its finite resources on those cases which are really urgent and need to be expedited, so as to try to minimise the extent of any damage to UK Industry’s commercial interests. This will be a new, temporary approach which is going to be put in place to try to help to clear the current backlog of held up licence applications in a measured and controlled way, with companies seeking to try to highlight to HMG any REALLY urgent cases, which HAVE to be prioritised for processing, and where this claim for urgency can be fully and rationally justified by the applicants. Other cases will continue to be dealt with in chronological order on the basis of when they were received by the ECJU
To that end, the UK Government, first and foremost, will be seeking to try to focus on the most urgent priority cases, by working with the major prime contractors to see if it might be possible to coral together a number of relevant licence applications which are related to the same project, so these can be dealt with in small batches. These major prime contractors are to be directly contacted separately and individually by the UK Government.
Whilst this is going on, ADS had been asked to assist in the implementation of a temporary triage system whereby other UK exporters, outside of the major prime contractors, can seek help to prioritise their applications which are part of the backlog on the basis of perceived urgency. Such prioritisation efforts must be fully justifiable. If a company is able to provide sufficient justification that their case is really urgent and needs to be prioritised, then these cases can be raised with the ECJU for possible expediting. We need to be fair to all parties, but, especially if some justification can be provided as to why particular cases need to be expedited, that would be extremely useful for the ECJU. However, approaches by individual companies to ECJU need to be done sparingly and in an informed way, as seeking to expedite any particular licence through the system will, of necessity, result in diversion of resources from the processing of other cases. However, it must be made clear that cases will continue to be reviewed and decisions made on a strict case-by-case basis against the consolidated criteria – this is purely a prioritisation exercise to help manage the processing of cases, and it will not influence the decision, itself.
Clearly potential risk to contracts that have been awarded and where the company concerned has evidence it can share that business may about to be lost will be one key reason for possible prioritisation. The size of the order is not an issue, as what might be small, low-level business to a prime, might represent an existential threat to a smaller company, who is likely to have a much smaller financial tolerance level to losing business. Also, what might be a very small value contract could be for trial and demonstration purposes, and potentially lead on to significantly larger future business, and the establishment of a long-term, strategically-important commercial relationship. There will be other criteria for prioritisation.
The focus at the moment is on those licences which have been impacted by the 20th June 2019 Appeal Court ruling on Yemen, covering licences for any of the Saudi Arabian-led coalition partners active in Yemen (including: UAE, Kuwait, Bahrain, Jordan, Senegal, Sudan and Egypt), and I will be in touch separately regarding Turkey, in due course.
If any companies want to raise any cases that they feel need to be expedited due to their perceived urgency, they should send the details of their most urgent and pressing cases, including: the relevant licence application numbers; end user; date when the licence application was submitted; date when the contract was signed; and whether it relates to an item that is part of a wider supply chain, along with justification as to why your case(s) need to be expedited, to Brinley.Salzmann@adsgroup.org.uk so he can see if he may be able to raise them with the Government for early resolution over the coming weeks.
EGADD TCCG Members Survey 2020
The Export Group for Aerospace, Defence & Dual-Use (EGADD) and techUK’s Trade & Customs Compliance Group (TCCG) are jointly conducting a survey to enable them to assess the scale of the problems (and lost business) which have and are being experienced by UK firms as a direct result of the current delays and “issues” with export licensing that have been being experienced since the 20th June 2019 Appeal Court ruling. This does NOT just relate to KSA, its allies in Yemen, and Turkey, but is seeking details of wider problems that have been experienced by UK exporters. This will then enable ADS and techUK to consider making effective representations to senior officials of the UK Government.
This survey will consider all aspects of the export/trade control licensing process. We are seeking feedback on companies’ practical experiences of dealing with the UK’s export and trade control licensing system over the past 8 months (ie in the period 20th June 2019 to 20th February 2020).
The intention would be to produce a consolidated summary report with any major generic, common issues or concerns being put to the ECJU for their response.
All supplied information will be treated in extreme confidence, and will be anonymised as far as practicable, unless companies specifically state that they are happy to be quoted.
This Survey seeks inputs from Members concerning their current experiences when working with the existing system.
Please answer all that are relevant to you. If they are not, just skip them.
Please provide in free-form text any additional and/or innovative ideas and suggestions you might wish to share with us.
Members are requested to download, complete and return the survey form by Friday 20th March to Brinley.Salzmann@adsgroup.org.uk
CFIUS, FIRRMA and Emerging Technology Update
- August 2018, John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA) (H.R. 5515, 115th Cong. (2018))
Companion legislation: approaching the problem from different angles
– Foreign Investment Risk Review Modernization Act (FIRRMA)
– CFIUS – Reviews foreign investment in the US
– Export Control Reform Act (ECRA)
– BIS – Reviews exports, reexports and transfers (in country)
- Policy Objectives
– Slowing down Chinese leadership in emerging technology
– Maintaining the integrity of supply chains
– Identifying trusted investors aligned with US national security and foreign policy interests
– On November 10, 2018, the CFIUS Pilot Program came into effect, implementing mandatory declaration filings
– On February 13, 2020, comprehensive new regulations came into effect implementing FIRRMA (and ending the pilot program)
– Two rules defining control parameters for certain emerging technologies
On-Demand Trade Compliance Training Launched for Exporters
Immediate Release – Wednesday 15 January
New on-demand trade compliance training has been launched by the Export Group for Aerospace, Defence & Dual-Use (EGADD), and online trade compliance training provider Content Enablers, have partnered to produce new training.
The new training is the result of extensive work by EGADD – the UK’s only dedicated national industrial body dealing exclusively with export control issues – and Content Enablers to identify and address the training needs of exporters of controlled goods. It is designed to increase robust understanding of the regulations and promote compliance in export control mechanisms.
Created in an engaging, self-paced format, the training programme is designed to reflect both job function and compliance responsibility with specific modules for professional staff as well as compliance practitioners.
The new online training products are now available to EGADD members who are encouraged to use the subscription-based model to complete their training, reinforcing and extending their trade compliance knowledge. Upon completing the training, participants will receive Certificates of Continuing Professional Development from King’s College London.
Brinley Salzmann, Director of Overseas and Exports at EGADD and ADS, said:
“Our member companies operate an increasingly complex global trade environment. Ensuring that their leadership and employees in marketing and business development, engineering, human resources, and other roles understand how to spot potential red flags is critical to avoiding potential fines, penalties, and reputational damage.
“We wanted to make certain that our member companies have access to the best trade compliance training possible, and Content Enablers has a proven track record of providing training to leading companies in the aerospace and defence industry.”
Brad Kabanuk, President of Content Enablers said:
“Content Enablers has supported the compliance training needs of UK companies for two decades, but the need for effective training has never been more pronounced. This partnership with EGADD leverages our expansion into on-demand learning-as-a-service and our collaboration with King’s College London for continuing professional development units for our courses.”
“We are truly excited to partner with EGADD to create a unique trade compliance training offering for their member companies. Given our extensive experience in the UK aerospace and defense industry, combined with our unique learning model and industry-first partnership with King’s College London, we are well positioned to add significant value as a partner for EGADD.”
Notes to Editors
ADS is the UK trade organisation representing the aerospace, defence, security and space sectors, with more than 1,100 member businesses.
The Export Group for Aerospace, Defence & Dual-Use (EGADD) is a not-for-profit-making special interest industry group, founded in September 2004, focusing exclusively on all aspects of export and trade control matters. EGADD is the only dedicated national industrial body in the UK dealing exclusively with export control issues. EGADD operates under the joint auspices of ADS, British Marine, the British Naval Equipment Association (BNEA), the Society of Maritime Industries (SMI), and techUK.
About Content Enablers
Recognized as the most comprehensive online global trade compliance training solution, our platform is used by leading companies around the world, ranging from the Fortune 500 to small businesses that create the products and services that drive business forward and affect our everyday lives. Whether you’re looking for a solution to train your professional staff, trade compliance practitioners, or suppliers, you can rely on Content Enablers to help you move global trade forward efficiently and compliantly.