Last reviewed 5 November 2013
Sandra Strong discusses exporting “dual-use” items, whose capabilities mean they can have both a civil and military application without any modification.
Despite stories to the contrary, the UK has more than the average number of high-tech businesses and companies supplying goods, software and technology, designed and manufactured here, to customers both within the UK and outside. This brings with it a number of compliance issues and, though the UK Government, UK Trade & Investment (UKTI) and the Chamber network do their very best in providing support to these high-tech, specially controlled areas, some businesses still do not know that they may come under specific regulations, especially if shipping goods, software and/or technology outside the UK.
It is not difficult to appreciate that combat aircraft, a missile guidance system, or certain chemicals and explosives come under export controls, but what about telecommunication equipment, servers and routers, bare printed circuit boards, electronic connectors, heat exchangers, text equipment, emailing encrypted software? Surely these products do not require special export permissions? Well, they might.
Unfortunately, UK exporters of these types of products will not know until their goods are stopped at export by Customs or the Border Force, or they get a visit from HM Revenue & Customs (HMRC). The penalties are not to be ignored.
A strict liability offence, eg export or attempted export of controlled goods/technology without a licence, can lead to:
goods liable to seizure
a penalty of up to three times the value of the goods/technology
with knowledge of weapons of mass destruction (WMD) end-use, up to two years’ imprisonment.
A deliberate act with intent to evade controls can lead to:
the Magistrates’ Court, with a fine of £5000 or three times the value of the goods (whichever is greater) and/or six months’ imprisonment
the Crown Court, with 10 years’ imprisonment and/or an unlimited fine.
This sounds scary, but only around 5% of UK exports come under these controls. If you ship goods, software or technology in a physical or intangible format to someone outside the UK, you are an exporter and legally must know if and when these controls affect you.
There are two levels of export licensing controls.
Goods and technology specifically designed for military use and high-grade/high-technology products which, though not designed for military use, could be used in that area. These are known as strategic goods. It is the high-grade/high-technology group that companies are often not aware fall under export controls.
In addition, exporters must be aware of current embargoes and sanctions levied by a number of bodies and authorities, including the UK, EU, USA, UN and the Organization for Security and Co-operation in Europe (OSCE). In addition, exporters should also be aware of the “Catch-All” controls that relate to goods/technology that may be used in a nuclear activity, unsafeguarded nuclear fuel cycle, or for military end-use being sent to certain destinations, even if the product was not specifically designed for the military.
If you are asked to specially design, develop, adapt, configure or re-configure goods or technology for a military end-use then you will come under the Military List controls, and an export licence will be required before you can supply the technology or goods outside the UK.
It you do not specially design for military end-use you can still be caught under the regulations if the inherent capabilities of your products mean they would be “useful” in such an environment without modification. This can include the fact that goods are made of certain polymer compounds or special metals, routers and telecommunication equipment with capability of a high-level of encryption, and whether it is active or not (products being supplied to oil and gas companies overseas have recently been detained by HMRC). Products and technology such as these are called dual-use goods — a very misunderstood phrase. First, “dual-use” does not mean something used by both military and civil end-users, it refers to the item’s technical capabilities.
Some examples of products and technology defined as dual-use include (but are not exclusive to) the following.
The inherent capabilities can be the materials they are made of, eg being able to withstand very high or low temperatures, eg some o-rings, or seals made of specific types of fluorinated compounds.
Materials, metals or semi-produced items, eg nickel tubes or pipes specially designed for named products, eg heat exchangers.
Equipment used to manufacture or test high-tech items, eg lathes.
Chemicals and related items, eg glass flasks that can withstand very high or low temperatures without breaking.
Para-military items, including security and surveillance equipment.
Electronics (eg microprocessors), computer and telecommunications equipment dependent on their technical capabilities.
Encryption levels in goods (eg servers, routers) and software.
Cutting-edge technology in the field, eg laser technology.
Some aerospace, marine and satellite goods.
The full UK Strategic Export Controls Lists can be found on the Gov.uk website.
The levels of technology on which the dual-use regulations are set are based on the multi-country Wassenaar Arrangement. Full member countries include all EU Member States plus Australia, Japan, Norway, Switzerland (including Liechtenstein), New Zealand, Canada and the USA, as well as other observer countries. Each country then sets out its own dual-use controls based on the Arrangement. In the USA, dual-use regulations are within the Export Administration Regulations (EAR) and products are either EAR99 (below the level of control) or given a specific category number called an Export Classification Code Number (ECCN), eg 5A001. The UK has a common Dual-Use List within the EU (the DUEC), but this does not mean you can just move items caught under these controls around without doing anything. You must maintain a register and make a statement to the fact they are controlled on invoices and other commercial paperwork.
The good news is that, if you are caught under these export control regulations, the UK has a system of General Authorisation, which takes some of the administrative burden away. However, unfortunately, ignorance is not a defence.
If you are concerned that you may be exporting products that come under dual-use or military design controls, you can get more information from the Gov.uk website, in particular:
Also, you may like to consider registering for updates on the Export Control Organisation (ECO) website and/or for the electronic system of rating products and technology and licence applications called SPIRE.