Export Controls in the United Kingdom
Overview of UK export controls
Post-Brexit, the UK now has an export control regime that is independent from that of the EU, governing the movement of dual-use and other sensitive goods from the UK (alongside pre-existing standalone UK export controls on military and other items).
The UK’s export control regime still remains very closely aligned to that of the EU, such that the majority of the core principles set out in Chapter 8 continue to apply equally in the UK, and we do not cover those further in this chapter.
However, although closely related to the EU’s regime, there are certain differences between the UK and EU export control regimes, as well as a number of additional requirements and complexities resulting from the disentanglement of the UK from the EU dual-use export control regime. This chapter summarises these key considerations from a UK export perspective, supplementing the core principles under EU export controls covered in Chapter 8.
UK dual-use export controls
Impact of Brexit
Prior to 31 December 2020, the EU Dual-Use Regulation (as discussed in Chapter 8) governed the movement of dual-use goods from the EU to countries outside of the EU and was directly applicable in the UK. Following the end of the Brexit transition period, the UK has retained and transposed the EU Dual-Use Regulation (and EU Torture Regulation) into UK law, meaning that it will (currently) continue to operate in the UK effectively as it did prior to the end of the transition period, as described in Chapter 8 (alongside pre-existing independent UK dual-use and military export controls). However, post-Brexit, the UK is now treated as a ‘third country’ from the perspective of EU export controls and vice versa. The Export Control (Amendment) (EU Exit) Regulations 2019 and The Export Control (Amendment) (EU Exit) Regulations 2020 amend the UK’s Export Control Order 2008 and Export of Radioactive Sources (Control) Order 2006 to ensure the application to exports originating from the UK, rather than references to the EU.
UK controlled items
In the UK, goods, software and technology subject to export controls (Items) are consolidated and listed within the UK Strategic Export Control Lists. This includes not only military and dual-use listed Items, but also certain other lists, including torture equipment, non-military firearms and radioactive sources.
Given that the UK has transposed the EU Dual-Use Regulation into UK law, and remains a party to the same relevant international export control frameworks (i.e., the Wassenaar Arrangement, the Australia Group (chemical weapons), the Nuclear Suppliers Group and the Missile Technology Control Regime), the current UK and EU export control lists are very closely aligned. However, there is scope for divergence going forwards. Indeed, divergences between the EU and UK dual-use lists could become a reality more quickly than expected if the forthcoming amendments to the EU Dual-Use Regulation (the Recast Regulation), which is expected to be adopted in the EU during 2021, are not adopted in the UK.
Dual-use exports between GB and the EU – a new requirement for export licences
As a result of Brexit, export licences will now be required for the export of all controlled dual-use items between Great Britain (i.e., England, Scotland and Wales) (GB) and the EU.
The UK and EU have both sought to mitigate the impact of this by issuing general licences that permit the export of dual-use items between GB and EU as follows:
- the UK’s Export Control Joint Unit (ECJU) has issued an Open General Export Licence for the export of dual-use items from and to EU Member States and the Channel Islands (EU-27 OGEL); and
- the EU has added the UK to the Union General Export Authorisation EU001 (EU GEA 001), joining the eight existing territories to which the majority of EU dual-use Items can be exported under this authorisation, namely Australia, Canada, Japan, New Zealand, Norway, Switzerland (including Liechtenstein) and the US.
The EU-27 OGEL and EU GEA 001 avoid the need for exporters to apply for specific individual licences for exports of dual-use items between GB and the EU. They also remove any waiting time for authorisation before proceeding with an export, as both licences simply require the exporter to register for their use. However, there will be an increased administrative burden on exporters, given the need to comply with the relevant requirements under these licences, as follows:
- Registration: in the UK, exporters will need to sign up to the UK’s online export licence system (SPIRE) and register for the EU-27 OGEL; likewise, in EU Member States, exporters will also have to register with the relevant EU Member State authority if using the EU GEA 001 (with registration requirements varying, sometimes significantly, between those Member States).
- Licence conditions: exporters are also required to meet certain conditions under both the EU-27 OGEL and EU GEA 001, including record-keeping. Failure to do so can be a criminal offence, and could result in being restricted from using the licence in the future. Notably, the EU-27 OGEL does not apply in certain situations where an exporter knows that the final destination of the items concerned is outside the EU and no processing or working is to be performed within the EU (other than where the end destination would be covered by an existing UK licence available to the exporter).
- Audits: registration for the EU-27 OGEL will likely also result in the registrant being subject to audits by the UK ECJU.
Dual-use exports from the EU or UK to the rest of the world
Previously, exporters exporting dual-use goods from the EU or UK to the rest of the world (RoW) could apply for a licence in either the UK or another EU Member State and subsequently export from any country in the EU (subject to certain restrictions in respect of specific licences, and the position of relevant EU Member State export authorities). However, post-Brexit, this is no longer possible as:
- UK issued export licences are no longer valid for exports from the EU to RoW;
- EU Member States-issued export licences are no longer valid for exports from the UK to RoW; and
- the ‘exporter’ (i.e., the entity that holds the relevant licence) must be established in the EU to export from the EU, and in the UK to export from the UK.
As such, companies may need to establish branches or entities in the UK or in an EU Member State, or otherwise identify a third party to act as the relevant ‘exporter’, to obtain and ensure appropriate export licence coverage.
In certain cases, there may be applicable licensing requirements in both the UK and EU. This may include situations where a UK exporter exports an item to the EU, knowing that the item will then be transferred to outside the EU – potentially triggering both UK and EU licensing requirements to the final destination. Given UK and EU rules on ‘brokering’ (including arranging the movement of items between third countries), there may also be situations where EU and UK export and brokering licensing requirements apply in parallel.
In order to minimise certain potential disruption for exporters, the UK has taken steps to ensure that existing licences issued by the UK to export dual-use items to non-EU countries remain valid:
- existing OGELs for exports outside of the EU have been amended to apply to exports from the UK only, in line with the UK’s new legislation; however, exporters do not have to re-register for these OGELs and registrations have been carried across; and
- existing EU GEAs have been copied into the UK as retained GEAs. Therefore, exporters using a GEA to export from the UK to outside the EU prior to Brexit can continue to do so.
As noted above, these general export licences can be registered for and used immediately, provided that the exporter complies with all conditions and requirements of the relevant licence. In contrast, for a single individual export licence (SIEL), the target processing time for licence applications is 20 working days, with a longer 60-working-day target processing time for the broader open individual export licences (OIELs).
Furthermore, existing intra-EU transfer licences issued by an EU Member State for transfers to the UK became valid licences for exports to the UK (until their expiry).
The impact of the Northern Ireland Protocol
Although the UK will be treated as a third country from the perspective of EU export controls and vice versa, conversely, the EU Dual-Use Regulation continues to apply directly in Northern Ireland (NI), pursuant to the Protocol on Ireland/Northern Ireland.
The EU and UK agreed the Protocol on Ireland/Northern Ireland to prevent a hard border between Northern Ireland and the Republic of Ireland, by keeping NI in the EU’s Single Market for goods. This has an impact from a dual-use export control perspective. Whereas the EU Dual-Use Regulation will continue to apply as ‘retained EU law’ in GB, the version of the EU Dual-Use Regulation that applies in the EU will continue to apply in NI. As a result, different versions of the EU Dual-Use Regulation will apply in GB and NI moving forward.
A divergence in the dual-use lists between the EU and UK over time could potentially result in different dual-use lists being applied in GB and NI. This could also be influenced by the fact that the Court of Justice of the European Union (CJEU) will continue to have jurisdiction over EU Dual-Use Regulation as applicable in NI. The Recast Regulation, as noted above, could also lead to greater divergence between the dual-use export control rules applicable in NI and GB respectively.
Exports between NI and the EU
The EU has made it clear that, in line with the Protocol on Ireland/Northern Ireland, exports between the EU and NI will be treated as intra-EU transfers in both directions and will not need a licence (other than in respect of items controlled under Annex IV to the EU Dual-Use Regulation or in respect of military-controlled goods). Therefore, the majority of dual-use goods being exported between NI to the EU will not require an export licence.
Exports between GB and NI
The UK government has made it clear that there will be no licensing requirement to move dual-use items from NI to GB, or vice versa. However, in its September 2020 Notice to stakeholders, the European Commission stated that shipments of dual use items from NI to GB are exports for the purposes of the EU Dual-Use Regulation, with the competent authority for licensing being the competent UK authority (i.e., the ECJU).
This inconsistency does not yet appear to have been resolved between the UK or EU authorities. In any event, exporters should avoid using this potential inconsistency as a means to circumvent applicable export requirements by routing exports via NI to destinations where licences are clearly required.
Military export controls
As noted in Chapter 8, export controls in relation to military items are the preserve of each EU Member State. Consequently, the UK’s departure from the EU has not had a material impact on the UK’s military export regime and the export of military items from the UK to the EU (and indeed between all EU Member States) still requires an export licence. UK Guidance also clarified that the position has not changed regarding NI in respect of these controls.
The UK’s military export controls are set out in Schedule 2 of the UK’s Export Control Act 2008. This currently remains closely aligned with the EU common military list.
Consequences of non-compliance with UK export controls
Post-Brexit, the responsibility of implementing and enforcing export controls in the UK remains with the UK, as it did before.
The main enforcement body for export control in the UK is Her Majesty’s Revenue and Customs (HMRC). In addition to referring cases to the Crown Prosecution Service (CPS) for a potential prosecution, HMRC is also able to issue administrative penalties (sometimes known as ‘compound’ penalties), as a way of settling an investigation that it would otherwise refer to CPS for a potential criminal prosecution. The power for HMRC to issue a compound penalty is found in Section 152 of the Customs and Excise Management Act 1979. Compound penalties are sometimes made public in an anonymised form and whether or not HMRC seeks to settle a breach by way of a compound penalty, or recommends a criminal prosecution, depends on a variety of factors.
In the UK, there are a number of criminal offences that may be triggered by an export control violation, depending on the nature of the breach. The majority of UK offences are set out in the Export Control Order 2008 (the Order), in addition to the Customs and Excise Management Act 1979, and these fall into one of four categories:
- offences concerning prohibited or controlled goods. These offences relate to:
- military goods;
- goods that may be used for purposes relating to weapons of mass destruction (WMD);
- providing any technical assistance for the supply, delivery, manufacture or maintenance of WMD;
- supplying or delivering, or agreeing to supply or deliver, or doing anything to promote the supply or delivery of certain goods between any overseas country and embargoed destinations; and
- supplying or delivering, or agreeing to supply or deliver, or doing anything to promote the supply or delivery of Category A goods, Category B goods or Category C goods from one third country to another third country (namely the items on the UK’s control list of military items, categorised according to their sensitivity);
- offences concerning dual-use goods (i.e., dual-use items or any item that is usable for both civil and military purposes);
- offences concerning the Torture Regulation; and
- offences concerned with making misleading statements for obtaining a licence.
Although there are a number of offences that can be triggered by a breach, we have seen UK enforcement authorities increasingly use their administrative powers of settlement. For example, between March and September 2020, HMRC received 19 compound settlements totalling over £700,000. This is the highest annual total for export control fines to date.
1 Tristan Grimmer and Ben Smith are partners at Baker McKenzie London.
2 Article 3(1) European (Withdrawal) Act 2018.
3 UK Strategic Export Control Lists, January 2021, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948279/uk-strategic-export-control-list.pdf.
4 Regulation (EU) 2020/2171.
5 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, Protocol on Ireland/Northern Ireland.
6 As amended by The Export Control (Amendment) (EU Exit) Regulations 2019 and The Export Control (Amendment) (EU Exit) Regulations 2020.
7 See id., at Articles 34 and 3.
8 See id., at Articles 34 and 19.
9 See id., at Articles 34 and 20.
10 See id., at Article 21 and Schedule 1, Part 1 of the Order for Category A goods.
11 See id., at Article 22 and Schedule 1, Part 2 of the Order for Category B goods.
12 See id., at Article 23 and Article 2(1) for Category C goods.
13 id., at Article 35.
14 id., at Article 2(1).
15 id., at Article 36.
16 id., at Article 37.