1 22 May 2006 The Role of Industry Outreach in Export Control: Players, Commitments & Interaction By Dr. Radoslav Deyanov, Ministry of Foreign Affairs, Bulgaria International Seminar for Western Balkans Countries “Export Control of Dual-Use Items and Arms: Industry Outreach” Sofia, 22 – 23 May 2006

22 May Q: Reaching out to Industry? How to assist manufacturing & trading companies in complying with established export controls (E.C.) requirements?

22 May The Main Players Legislative & administrative regulatory bodies, Legislative & administrative regulatory bodies, Government licensing & enforcement agencies, Government licensing & enforcement agencies, Manufacturing & trading companies, including brokering & transportation agents, Manufacturing & trading companies, including brokering & transportation agents, International E.C. regimes/NP treaties organisations (UN, IAEA, OPCW, UNMOVIC, etc.), International E.C. regimes/NP treaties organisations (UN, IAEA, OPCW, UNMOVIC, etc.), Permanent interaction between the main players. Permanent interaction between the main players.

22 May The Rationale The better the main players know the rules of the E.C. game, the more easily and smoothly they will interact, and the more satisfactory the results of the interaction would be for all.

22 May How to Assist Industry? Assisting industry in complying with the rules: the nature of outreach; Assisting industry in complying with the rules: the nature of outreach; Two possible ways of “assisting” industry in complying with the E.C. rules: Two possible ways of “assisting” industry in complying with the E.C. rules: –Imposing & enforcing regulations (mandatory approach), –Consulting, explaining & convincing (partnership approach); Which approach is better, preferable? Which approach is better, preferable?

22 May “Imposing” v/s “Convincing”? “Mandatory” approach (“imposing”): “Mandatory” approach (“imposing”): –Imposes obligations on companies, –Creates order & accountability, –Provides clear rules of interaction, –Necessary element of any E.C. exercise; “Partnership” approach (“convincing”): “Partnership” approach (“convincing”): –Raises awareness & adds understanding, –Seeks to explain & convince to act responsibly, –Aims at assisting responsible business; “Partnership” complements & reinforces “imposition” of rules (equally good & needed). “Partnership” complements & reinforces “imposition” of rules (equally good & needed).

22 May “Unaware Company” Case An export permit application: An export permit application: –to embargo/sanctions destination or an armed conflict region; –to suspected WMD “proliferating country” or risks of diversion; –to a country with a clear “political repression record”; Reasons: Reasons: –Lack of knowledge, unawareness, or –Deliberate reliance on inefficient or corrupted licensing bodies; Implications from an inevitable denial: Implications from an inevitable denial: –Wasted efforts & money, inefficient business activities, –Creating “bad company image”.

22 May Case Conclusion Governments are often in debt of assisting companies who honestly apply for export permits with little awareness of the E.C. situation (not those who are doing this “time & money wasting” exercise with the idea of “abusing the weakest links” of the N.E.C. system)

22 May “Rushing to Sale” Company Negotiating & concluding a transaction deal in advance of an export permit application: Negotiating & concluding a transaction deal in advance of an export permit application: –Seeks to secure production lines, salaries & company profit, –Creates expectations within the recipient country, Denial of export application might lead to: Denial of export application might lead to: –Frustration by the “end-user” & bad trading image of exporter, –Worsening bilateral relations (exporting - recipient country), Consequences for industry & government: Consequences for industry & government: –Wasted efforts & money, inefficient business activities, –Creating “bad company image” & spoiling bilateral relations.

22 May Industry Needs Industry needs to know the “E.C. model”: Industry needs to know the “E.C. model”: –its main players (international & national), –basic international commitments of states, –national legislation requirements, procedures, rules of interaction, –consequences from E.C. non-compliance, –ways to avoid inadvertently providing support to an illicit WMD programme (do not want “a bad company” mark!), –“winds of change” in international E.C. regimes & harmonization Both government & industry/trade need to learn: –How to reconcile & balance “trade promotion” with necessary “security restrictions”.

22 May Need to Reconcile! On one hand: On one hand: –Free international trade between market economies, –Promotion of benefits from sensitive international trade, –Legitimate interest in creating national defense capability, –Commitment to build up capacity for maintaining peace; On the other hand: On the other hand: –International commitments to prevent WMD proliferation, –International determination to avoid (even prevent): Destabilizing accumulation of arms in regions of conflict/tensions, Destabilizing accumulation of arms in regions of conflict/tensions, Provision of tools of repression to authoritarian regimes, Provision of tools of repression to authoritarian regimes, –Desire to maintain the credibility of legitimate sensitive trade.

22 May Outreach Benefits: Facilitates E.C. licensing & enforcement, Facilitates E.C. licensing & enforcement, Makes responsible trade more efficient & profitable business, Makes responsible trade more efficient & profitable business, Adds a flavor of responsibility & efficiency to the national export control systems (N.E.C.), Adds a flavor of responsibility & efficiency to the national export control systems (N.E.C.), Provides feedback for improvements in E.C. legislation and administrative measures. Provides feedback for improvements in E.C. legislation and administrative measures.

22 May Outreach Purposes Encourage & promote better understanding of the E.C. rationale, requirements & procedures, Encourage & promote better understanding of the E.C. rationale, requirements & procedures, Raise industry awareness of security concerns & international commitments of states, Raise industry awareness of security concerns & international commitments of states, Facilitate compliance with E.C. procedures, Facilitate compliance with E.C. procedures, Create conditions for smooth interaction with government in applying E.C. procedures, Create conditions for smooth interaction with government in applying E.C. procedures,

22 May Outreach Purposes (cont) Assist in balancing the “trade promotion” drive with international security requirements, Assist in balancing the “trade promotion” drive with international security requirements, Establish partnership with key industry players, Establish partnership with key industry players, Create confidence in the legitimacy of responsible trade in sensitive items, Create confidence in the legitimacy of responsible trade in sensitive items, Help industry follow never-ending adjustments to the E.C. model, principles, guidelines, etc. Help industry follow never-ending adjustments to the E.C. model, principles, guidelines, etc.

22 May The E.C. Model International mandate for States to control sensitive trade (dual-use & arms transfers), International mandate for States to control sensitive trade (dual-use & arms transfers), State obligations under international E.C. law, State obligations under international E.C. law, E. C. principles, architecture & interaction rules, E. C. principles, architecture & interaction rules, Structure & components of N.E.C. systems, Structure & components of N.E.C. systems, International harmonization/cooperation, International harmonization/cooperation, Dynamic nature of interaction: need to adjust to changing international requirements. Dynamic nature of interaction: need to adjust to changing international requirements.

22 May International Context WMD proliferation threats: growing concerns, WMD proliferation threats: growing concerns, Global determination to counter WMD proliferation & arms exports destabilisation, Global determination to counter WMD proliferation & arms exports destabilisation, Development of international “hard & soft law”, Development of international “hard & soft law”, N.E.C. systems: the tools to contribute to NP, N.E.C. systems: the tools to contribute to NP, Concerted efforts to harmonize N.E.C. systems: Concerted efforts to harmonize N.E.C. systems: –Excel national machineries to control sensitive exports, –Coordinate E.C. policies of like-minded states (common criteria) –Cooperate to deter & enforce E.C. restrictions (deterrence!).

22 May Non-Proliferation Architecture NP Treaties UNSC process EU Strategy G-8 Programme Export Control Regimes

22 May E.C. International mandate International mandate to control exports: International mandate to control exports: Obligations under “hard” international law, Obligations under “hard” international law, UNSC Res (2005) under Chapter VII of the UN Charter: mandatory character! UNSC Res (2005) under Chapter VII of the UN Charter: mandatory character! Political commitments under “soft” law, Political commitments under “soft” law, Coordination of E.C. policies: Coordination of E.C. policies: –Exchange of denial information (transparency), –Harmonized criteria to assess transfer applications.

22 May Layers of Export Control NPT, CWC, BWC, IAEA safeguards protocols National Export Control Systems AG, NSG, MTCR, WA, ISP

22 May E.C. Legal Basis? “Hard law” – legally binding agreements: “Hard law” – legally binding agreements: NPT, CWC, BWC, ENMOD, START, INF, CFE NPT, CWC, BWC, ENMOD, START, INF, CFE UN SC actions under Chapter VII (Charter) – mandatory! UN SC actions under Chapter VII (Charter) – mandatory! durable, well defined, easier to verify; durable, well defined, easier to verify; “Soft law” - politically binding: “Soft law” - politically binding: unilateral actions – decrees, national policies, etc., unilateral actions – decrees, national policies, etc., export policy co-ordination - AG, MTCR, NSG, WA, export policy co-ordination - AG, MTCR, NSG, WA, political understandings & joint declarations. political understandings & joint declarations.

22 May E.C. Security Benefits? Raises extra barriers (legal, political, punitive), Raises extra barriers (legal, political, punitive), Makes proliferation more costly (deterrent!), Makes proliferation more costly (deterrent!), Increases the risks of timely detection, Increases the risks of timely detection, Delays (WMD) acquisition process - “buys time” for more coercive enforcement measures, Delays (WMD) acquisition process - “buys time” for more coercive enforcement measures, Creates political bond amongst participants, Creates political bond amongst participants, Transparency of responsible trade actors. Transparency of responsible trade actors.

22 May N.E.C. Systems Enact policy of controlling international trade in sensitive items & high technologies, Enact policy of controlling international trade in sensitive items & high technologies, Based on accountancy of movements of dual- use materials, technologies, arms, etc., Based on accountancy of movements of dual- use materials, technologies, arms, etc., Introduces controls to prevent risky shipments, Introduces controls to prevent risky shipments, Flexible framework facilitating adjustment to changing international requirements. Flexible framework facilitating adjustment to changing international requirements.

22 May N.E.C. Building Blocks Create legal foundations (laws & regulations), Define policy & policy-making mechanism – establish criteria for assessing exports, Introduce a licensing system for exports with an executive machinery, Publish control lists of dual-use items & arms, Enact penalties for violators (efficiency!), Establish a compliance/enforcement mechanism,

22 May N.E.C. Building Blocks (cont) Provide sufficient resources (human & financial), Coordinate roles of enforcement agencies, Harmonise legislation & practices with those of other supplier States (uniformity, no-undercut!), Use mechanism of sharing “best practices”, Cooperate regionally with neighbouring States, Reach out to industry & trading companies.

22 May EU Industry Outreach EU Council document 15291/05 (5 Dec. 2005), EU Council document 15291/05 (5 Dec. 2005), Recognized the need for industry outreach, Recognized the need for industry outreach, Published an “Outreach to Industry Checklist”, Published an “Outreach to Industry Checklist”, Resulted from a Peer Review’s recommendation: Resulted from a Peer Review’s recommendation: –Examine existing practices on outreach to industry, –Assess whether improvements should be made, –Flexible application, depending on export levels; 13 tools for industry outreach available to MS; 13 tools for industry outreach available to MS;

22 May “Outreach to Industry Checklist” Websites content (8 main & 5 optional items), Websites content (8 main & 5 optional items), Circulation of warnings on E.C. changes, Circulation of warnings on E.C. changes, Provision of guidance materials for training, Provision of guidance materials for training, Organisation of seminars or workshops on E.C., Organisation of seminars or workshops on E.C., “User Help” facility & license officer contact details “User Help” facility & license officer contact details Provision of advice on compliance programmes, Provision of advice on compliance programmes, Feedback from exporters on services obtained, Feedback from exporters on services obtained,

22 May “Outreach to Industry Checklist” Keep export promotion agencies aware of E.C. policy restrictions: coordination & harmonization, Keep export promotion agencies aware of E.C. policy restrictions: coordination & harmonization, Briefings for companies by state agencies, Briefings for companies by state agencies, Develop relationship with chambers of commerce/ trade associations or other representative bodies: Develop relationship with chambers of commerce/ trade associations or other representative bodies: –E.C. requirements advice to their member organisations, –Contact points for consultations on E.C. changes; Keep R & D institutions/universities aware of E.C.: Keep R & D institutions/universities aware of E.C.: –Intangible transfers (ITT) & technical assistance.

22 May E.C. Websites Content Access to Regulation 1334/2000 & controlled list, Access to Regulation 1334/2000 & controlled list, Details of strategic national E.C. legislation, Details of strategic national E.C. legislation, Licence application forms and guidance for use, Licence application forms and guidance for use, Advice on EUCs form and content required, Advice on EUCs form and content required, Conditions for use of individual & global licences, Conditions for use of individual & global licences, Information on how to register: Information on how to register: –for Community General Export Authorisation (CGEA), –for national general export authorisations (if applicable), –as an exporter of dual-use items;

22 May E.C. Websites Content (optional) Explanation of the rationale for strategic E.C., Explanation of the rationale for strategic E.C., Guidelines on how end-use control is applied, Guidelines on how end-use control is applied, Guidance on product classifications, Guidance on product classifications, Information on: Information on: –penalties for E.C. infringements, –sanctions and embargoes in force.

30 The OPCW

22 May OPCW: “Industry Outreach” Need to implement Art. VI & Art. VII of CWC, Need to implement Art. VI & Art. VII of CWC, Reach out to civil chemical facilities & trading companies on CWC prohibitions, data monitoring & OPCW on-site inspection provisions, Reach out to civil chemical facilities & trading companies on CWC prohibitions, data monitoring & OPCW on-site inspection provisions, Seminars & “hand-on” instructions to industry, Seminars & “hand-on” instructions to industry, Information pamphlets & brochures, Information pamphlets & brochures, A “walk-in” office for industry in licensing body, A “walk-in” office for industry in licensing body, CWC-dedicated website & working relationships; CWC-dedicated website & working relationships;

22 May Decalogue of Conclusions A clear international NP mandate for States, A clear international NP mandate for States, States are under legal obligations to control exports of dual-use items & arms, States are under legal obligations to control exports of dual-use items & arms, Need to establish and maintain N.E.C. systems based on legislation & enforcement, Need to establish and maintain N.E.C. systems based on legislation & enforcement, Cooperation of industry with government is crucial for the smooth functioning of N.E.C., Cooperation of industry with government is crucial for the smooth functioning of N.E.C.,

22 May Conclusions (cont.) An efficient & responsible N.E.C system needs an “industry outreach” programme, An efficient & responsible N.E.C system needs an “industry outreach” programme, Both companies, academia & licensing bodies benefit from regular “industry outreach”, Both companies, academia & licensing bodies benefit from regular “industry outreach”, Understanding of the functioning of the E.C. model and its on-going changes assists industry in complying with E.C. requirements, Understanding of the functioning of the E.C. model and its on-going changes assists industry in complying with E.C. requirements, Need for internal compliance programmes, Need for internal compliance programmes,

22 May Conclusions (cont.) Countries aspiring to enter the EU may benefit from the Council’s “outreach to industry checklist”, Countries aspiring to enter the EU may benefit from the Council’s “outreach to industry checklist”, The experience of new EU Member States and Acceding Countries in “industry outreach” is a good source of “lessons-learnt” for the Western Balkans, The experience of new EU Member States and Acceding Countries in “industry outreach” is a good source of “lessons-learnt” for the Western Balkans, “Industry outreach” programmes of international E.C. regimes & NP organisations offer guidance in specific areas of dual-use & arms trade. “Industry outreach” programmes of international E.C. regimes & NP organisations offer guidance in specific areas of dual-use & arms trade.

22 May

22 May After 9/11/2001: “Clear & Present Danger”

22 May International E.C. Regimes Zangger Committee (support to IAEA) – 1971, Nuclear Suppliers Group (London Club) – 1977, Australia Group – 1985 (CW & BW-related activities), Missile Technology Control Regime – 1987, Wassenaar Arrangement (former COCOM) – 1996, Proliferation Security Initiative – 2003