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Business and Politics

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Volume 15, Issue 4 (Dec 2013)

Issues

Trade controls and non-proliferation: compliance costs, drivers and challengesa

Daniel Salisbury
  • Corresponding author
  • Centre for Science and Security Studies, Department of War Studies, King’s College London, Strand, London, WC2R 1HH, UK
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2013-11-21 | DOI: https://doi.org/10.1515/bap-2013-0006

Abstract

The private sector clearly has an increasingly important and well-defined role to play in slowing the flow of technology and preventing the provision of enabling services to states pursuing Weapons of Mass Destruction (WMD) and destabilising military capabilities. Exporters of proliferation-sensitive technology are frequently targeted by Iran and other countries. These countries are highly dependent on technology from the international market place to sustain their WMD and military programmes. Compliance with export controls only goes someway to ensuring that proliferation is prevented; a form of “over-compliance” is required to ensure that goods are not transferred to programmes of concern. This paper uses a significant quantity of primary data to consider the costs of compliance and over-compliance, the drivers for such processes, and the relationship between the national authority and firms and how this could be improved.

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About the article

Corresponding author: Daniel Salisbury, Centre for Science and Security Studies, Department of War Studies, King’s College London, Strand, London, WC2R 1HH, UK, e-mail:


Published Online: 2013-11-21

Published in Print: 2013-12-01


Gray and Jones (1991); Winter and May (2001); Yapp and Fairman (2006).

Gunningham and Kagan (2005).

For example, denied party screening and due diligence is relevant to the financial and insurance industries as well as manufacturing and export; most firms in most sectors need to have some due-diligence in place to avoid indulging in illicit transactions relating to proliferation or other illegal activities.

The knowledge and understanding from which this paper is largely drawn was collected in nearly 50 interviews with private sector actors conducted between June 2011 and March 2013. Other data utilised also includes a “2011 Compliance Survey” which was promoted through a UK Government Department for Business Innovation and Skills (BIS) “Notice to Exporters,” and conversations with UK government officials.

Kagan, Gunningham, and Nielsen (2011).

When data has been gathered during interviews, firm names have been replaced with letters to protect potentially corporate sensitive information. Please note the firms in these case studies are referred to using the same letter of the alphabet throughout. For example, Firm A is always referred to as Firm A, Firm B always as Firm B.

Kelly (1989).

Kay (1995).

International Institute for Strategic Studies (2007).

United Nations (2004).

Regimes such as the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR) and the Australia Group.

Albright, Brannan, and Scheel Stricker (2010: 94).

Technology, which is not listed by international supplier regimes or controlled by national export control legislation, can still be of use in a WMD program.

Stewart (2012).

Aurora and Gangopadhyay (1995).

The UK Government Department, which administers the export licensing process through the Export Control Organisation (ECO).

BIS (2009).

BIS (2009).

Wirtz (2007).

Interview, Compliance Officer, Firm A, conducted by the author in January 2012.

National authority is the generic descriptor used to describe the various elements of government involved in export licensing (this varies between countries, and sometimes between technologies).

Interview, Risk Manager, Firm B conducted by the author November 2011.

BIS (2009).

The 2011 Compliance Survey administered by the project indicated that 33/52 firms responding trained their sales team to spot illicit procurement attempts.

Management Dynamics (2010).

Interview, Managing Director, Firm D conducted by the author, 2012.

Balani (2010).

Management Dynamics (2010).

Interview with Compliance Officer, Firm C, conducted by the author, 2011.

Interview, Compliance Manager, Firm M, conducted by the author, January 2012.

Interview, Risk Manager, Firm B conducted by the author, November 2011.

Management Dynamics (2010).

The 2011 Compliance Survey administered by the project indicated that at least 33/52 companies train their sales team to spot illicit enquires.

Interview, Compliance Officer, Firm A, conducted by the author, January 2012.

The 2011 Compliance Survey administered by the project indicated that 35/48 of respondents were management or executive level staff.

The 2011 Compliance Survey administered by the project indicated that 41/48 responding companies had a designated senior management level employee working on export compliance issues.

Management Dynamics (2010).

2011 Compliance Survey response; Interview, Managing Director, Firm D, conducted by the author, 2012.

The ECO is the part of BIS in the UK, which administers the licensing process.

The 2011 Compliance Survey administered by the project saw 46/52 respondents answer that their licenses cost on average under £1000. Within this category, 25 answered that their average cost was between £100 and £1000 and 21 answered that theirs cost £0–100 on average.

Heaney (2011).

Bauer (2013).

Bureau of Industry and Security (2010).

“Confiscation and ancillary orders: Pre-POCA: Proceeds of Crime Guidance,” Crown Prosecution Service Website. Available from: http://www.cps.gov.uk/legal/a_to_c/confiscation_and_ancillary_orders/. Accessed 20 October 2013.

Bureau of Industry and Security (2010).

“Notice to Exporters 2010/29” and “Notice to Exporters 2010/36.” Available from: http://www.bis.gov.uk/policies/export-control-organisation/eco-press-prosecutions. Accessed 20 October 2013.

“Export Administration Regulations,” §766.25.b. Available from: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=58aa352bdb33814fa293ce104a2de1fa&rgn=div8&view= text&node=15:2.1.3.4.41.0.1.25&idno=15. Accessed 20 October 2013.

“Compliance Team: Audits and what it means to exports,” Head of ECO Compliance Unit, Presentation to EGAD Annual Meeting, 25 October 2011.

Export Control Order (2008) part 6, article 38. Available from: http://www.legislation.gov.uk/uksi/2008/3231/article/38/made. Accessed 20 October 2013.

Bureau of Industry and Security (2010).

“FAQ – Strategic Trade Act (2010),” Malaysian External Trade Development Corporation, see http://www.matrade.gov.my/en/faq/708-faq-strategic-trade-act. Accessed 15 November 2013.

“Notice to Exporters (Press Notice) – 12 July 2005.” Available from: http://www.bis.gov.uk/policies/export-control-organisation/eco-press-prosecutions/2005-2-eco-press-notice. Accessed 20 October 2013.

Radio 4 (2007).

van Erp (2008).

van Erp (2011).

This and other examples of how UANI seeks to use the reputational damage of disclosure can be found http://www.unitedagainstnucleariran.com/.

Interview, Risk Manager, Firm H, conducted by the author, 2012.

The 2011 Compliance Survey administered by the project found that 14/52 companies or 26% listed that the fear of blacklisting was a main driver of their compliance beyond the basic legal requirements.

Gunningham (2002); May (2005).

May (2004).

Piliavin, Gartner, and Matsueda (1986).

Kagan, Gunningham, and Nielsen (2011); Gunningham, Thornton, and Kagan (2005).

Interview, Compliance Officer, Firm J, conducted by the author, January 2013.

Interview, CEO, Firm K, conducted by the author, March 2012.

Simpson and Rorie (2011).

Kagan and Scholz (1984).

Kagan, Gunningham, and Nielsen (2011).

Lynch-Wood and Williamson (2007).

Interview, Compliance Officer, Firm L (large electronics firm), conducted by the author, December 2011.

Kurzrock and Hund (2013).

Oerlikon Leybold Vacuum (2009).

Stewart and McGovern (2013).

For example Interview, Compliance Officer, Firm I, conducted by the author, 2012.

Winter and May (2001).

For a number of more specific suggestions see Salisbury (2013).

The Defense, Nuclear and Aerospace integrators clearly make goods with potential uses in programs of concern, and have more resources to implement the legal requirements, which are often more detailed; contrast this to dual-use exporters which supply these companies and have fewer resources available.

Hill, Jeffrey, “US Congress Relaxes Satellite ITAR Restrictions,” Satellite Today, 26 December 2012. Available from: http://www.satellitetoday.com/military/milsatcom/U-S-Congress-Relaxes-Satellite-ITAR-Regulations_40316.html. Accessed 20 October 2013.

See for example the work of Committees on Arms Export Controls, UK Parliament “Committees on Arms Export Controls publishes report on strategic export controls,” UK Parliament Website, 13 July 2012. Available from: http://www.parliament.uk/business/committees/committees-a-z/other-committees/committee-on-arms-export-controls/news/por-substantial-/. Accessed 20 October 2013.

Kienzle (2013: p. 1145).

See the example in Salisbury and Lowrie (2013).

Interview, International Sales Manager, Firm L, conducted by the author, February 2012.

BIS (2012).

Interview, Compliance Officer, Firm M, conducted by the author, August 2011.

For more information, see www.acsss.info. Accessed 20 October 2013.

The research for this paper was collected as part of Project Alpha, a project that seeks to facilitate the implementation of trade controls by the private sector in the UK. The project is based within the Centre for Science and Security Studies (CSSS) at King’s College London, and was set up with UK government sponsorship during summer of 2011. The project has also benefited from the generous support of the John D. and Catherine T. MacArthur Foundation.


Citation Information: Business and Politics, ISSN (Online) 1469-3569, ISSN (Print) 1369-5258, DOI: https://doi.org/10.1515/bap-2013-0006.

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