1. Overview of Strategic Trade Control (STC) Concepts and Issues Jay P. Nash Research Fellow, Center for Policy Research (CPR) University at Albany, State University of New York (SUNY) jnash@albany.edu Strategic Trade Control Industry Outreach Seminar January 7 – 8, 2016 Taipei, Taiwan

2. Presentation Topics and Purposes Reasons for and benefits of strategic trade controls (STC) Identify critical STC concepts and aspects Provide insight into current status of STCs in the APAC region Highlight importance of STCs for trade intermediaries 2

3. Working Definition of “Strategic Trade Controls”  “Strategic trade controls” or “STC” (often referred to as “export controls”): collectively are special rules, restrictions, and administrative procedures, that apply to trade and transactions involving items, businesses/individuals, and countries for which there is the possibility the items involved will be used for a weapons-related purpose. Can also include other “trade controls” on imports, transit and transshipment, brokering, and technology transfer. In Taiwan = “Export Control of Strategic High-Tech Commodities (SHTC)” 3

4. Purposes (and Benefits) of Strategic Trade Controls Meeting international nonproliferation obligations and contemporary commercial standards General trade security Enhancing the brand and reputation of the domestic system Potential economic benefits from: 1) alignment with international business “best practices”; 2) more efficient allocation of time and resources; 3) and increased eligibility for higher-tech and higher-value supply chains 4

5. Elements of a Comprehensive and Effective STC System Legal framework Licensing process Industry compliance Enforcement mechanisms International cooperation 5

6. Critical STC Concepts and Aspects “Dual-use” and “strategic” items/commodities Item control lists “Catch-all” controls on end-uses, end-users, and trade destinations Requirements or restrictions for different types of transfers and activities such as: export and import; transit / transshipment; brokering / intermediary activities; and technology transfer Industry compliance and “internal compliance programs” (ICPs) STC enforcement 6

7. Types of Strategic Items Dual-use items: products, equipment, materials, technologies, parts, and software that have both commercial/civilian and potential weapons/military applications. –“WMD dual-use” –“Conventional dual-use” Munitions: arms, military equipment, and items specially designed for military use Strategic items: dual-use items as well as other types of export controlled items including arms and military equipment and weapons of mass destruction 7

8. Item Control Lists (1) Detailed list(s) of end-products, equipment, materials, parts an components, technology, and software that are subject to special requirement (usually a license) or restriction Item control lists are used to “classify” items, which is to determine whether a given item is subject to regulation The control list(s) of many STC systems (including Taiwan’s) are based on the European Union’s control lists, and are updated on an annual or other basis 8

9. Item Control Lists (2) Excerpt from the EU “List of Dual-Use Items” (2014) 9

10. “Catch-All” Controls (1) License or other requirements for certain: –End-uses - when traders know, should know, or are informed that the item they are dealing in may be used for WMD- or military-related end-uses –End-users - entities and individuals identified by international organizations and domestic agencies with whom trade in all or specific items requires a license –Destinations - countries and locations identified by international organizations and domestic agencies with whom trade in all or specific items requires a license 10

11. “Catch-All” Controls (2) Mainland China’s End-Use “Catch-All” Control “where the exporter knows or should know or receives notices from relevant administrative authorities of the State Council that his/her items and technologies to be exported have the risk of being used in weapons of mass destruction and their related means of delivery, an export license shall be applied for towards the items and technologies concerned, whether included in the Controlling List or not” 11

12. “Catch-All” Controls (3) Japan’s Foreign End-Use List (excerpt) 12 Available at: http://www.meti.go.jp/policy/anpo/law_document/tutatu/kaisei/150415_user-list-tokekomashi.pdfhttp://www.meti.go.jp/policy/anpo/law_document/tutatu/kaisei/150415_user-list-tokekomashi.pdf

13. Regulated Transactions and Activities (1) Transactions and activities that can be subject to licensing or other requirements –Export and import –Re-export (domestic or extra-territorial) –Transit and transshipment –Brokering and intermediary activities –Transfers of technology (both tangible and intangible) * Including those that occur into, from, in or through free trade zones and other special economic zones 13

14. Regulated Transactions and Activities (2) New Philippines Strategic Trade Management Act “Section 3. Scope and Coverage. This Act shall apply to: Any natural or juridical person operating within the Philippines who engages or intends to engage in the export of strategic goods from the Philippines, including designated special economic and free port zones, the import of strategic goods into the Philippines; or the transit or transshipment of strategic goods through the territory of the Philippines and the provision of related services; and all Filipino persons providing these services wherever located; and 5 6 The re-export of strategic goods that have been imported from the Philippines to a foreign country, and the reassignment of strategic goods imported from the Philippines to a new end user in the country of import subject to authorization under this Act.” 14

15. Regulated Transactions and Activities (3) Singapore, Strategic Goods Control Act (amended 2007) –Part 1(2): “Transmit," in relation to any technology, means: a) to transmit it in Singapore by electronic means; or b) to make it available in Singapore on a computer, so that it becomes accessible (whether on a request, or subject to a pre-condition, or otherwise) to a person in a foreign country, whether he is a specific person, a person within a specific class, any person in general or the person who carries out the transmission… 15

16. Industry Engagement and ICPs (1) Authorities’ support and transparency is key to industry STC compliance –Provide access to laws, regulations, control lists, as well as guidance on STM licensing and compliance –Allow for public/industry input and dialogue –Conduct workshops, trainings, and briefings for all business types and industry sectors Promote company internal compliance programs (ICPs) and provide incentives such as availability of bulk or more expedited licensing/clearance 16

17. Industry Engagement and ICPs (2) 17 Australia “Suspicious Approaches” Reporting Program Source: http://www.defence.gov.au/deco/Report.asphttp://www.defence.gov.au/deco/Report.asp

18. STC Enforcement (1) Administrative, criminal, and border/port enforcement agencies (e.g. Licensing agencies, Customs, Police) Administrative and criminal STC violations and matching penalties Tip hotlines and protection for “whistleblowers” Voluntary self-disclosure programs 18

19. STC Enforcement (2) Hong Kong STC Prosecution Cases, January – June 2015 19

20. Concluding Summary Review “Dual-use” and “strategic” items/commodities Item control lists “Catch-all” controls on end-uses, end-users, and trade destinations Requirements or restrictions for different types of transfers and activities such as: export and import; transit / transshipment; brokering / intermediary activities; and technology transfer Industry compliance and “internal compliance programs” (ICPs) STC enforcement 20