Revisions to UK export controls could impact exporters to China and Russia

In December 2021, the UK Government has made some significant updates to its export controls regime.
 
Military End-Use Controls
There will be two changes aimed at strengthening the UK’s ability to prevent exports that might be used to commit or facilitate human rights violations, notably in China:
 

1. China will be added to the list of destinations subject to military end-use controls. Currently, China is subject to UK and EU partial arms embargoes which, due to an anomaly in the drafting, left it off the military end-use controls list;
2. The definition of “military end-use” will be enhanced. Currently, the UK Government only applies this control to the export of non-controlled items intended for use as components in, or production equipment for, military equipment in an arms embargoed destination, such as Russia. The change will permit the control, on a case-by-case basis, of non-listed items intended for use by the military, paramilitary, security forces or police forces in such a destination. The revised control would only be applied where the Government informs the exporter that the proposed export is or may be intended for a military end-use in an embargoed destination. There will be exemptions for medical supplies and equipment, food, clothing and other consumer goods.

These changes will be made in Spring 2022 by secondary legislation amending the Export Control Order 2008.

UK Strategic Export Licensing Criteria
Updated criteria, last revised in 2014, will be applied with immediate effect in considering whether to approve or deny all applications for licences for exports, trade, transit/transhipment and technical assistance. As before, the criteria will not be applied mechanistically but on a case-by-case basis taking into account all relevant information available at the time the licence application is assessed. While the Government recognises that there are situations where transfers must not take place, it states that it will not refuse a licence on the grounds of a purely theoretical risk of a breach of one or more of the criteria. The main changes are:
 

• Brexit: the removal of references to the EU, including the EU Common Position 2008/944/CFSP which was previously binding in respect of the UK’s military exports; 
• Human Rights and International Humanitarian Law (Criterion 2): there are substantive changes: clarifying that a licence will not be granted if the Government determines that there is a clear risk that the items to be exported might be used to commit or facilitate internal repression or a serious violation of international humanitarian law; and explicitly stating that the Government will take into account the recipient country's attitude towards relevant principles of international humanitarian law. The clearer treatment of international humanitarian law reflects lessons learned from the recent judicial review case challenging UK exports to the Saudi-led coalition operating in Yemen on the grounds that they were allegedly being used in violations of international humanitarian law;
• Preservation of internal peace and security (Criterion 3): this was previously only one sentence stating that licences would not be granted for items which would provoke or prolong armed conflicts or aggravate existing tensions or conflicts in the country of final destination. It has been substantially expanded to address the risk that UK exports would undermine internal peace and security, taking a wide range of factors into consideration including humanitarian purposes, any involvement by the UK and allied states, legitimate national security interests, and gender-based violence. It might give the UK Government more flexibility in considering the supply of arms to rebel groups in a civil conflict;
• Preservation of peace and security (Criterion 4): the revision adds some of the same new factors as Criterion 3, again potentially giving the UK Government more flexibility in cases of regional or international conflict;
• The behaviour of the buyer country with regard to the international community (Criterion 6): this now includes the attitude of the buyer country to transnational organised crime as well as to (as formerly) terrorism, and adds the risk of gender-based violence as a factor for consideration;
• Risk that the items will be diverted to an undesirable end-user or for an undesirable end-use (Criterion 7): now also includes transnational organised crime;
• Other Factors: these previously allowed the Government to rely upon relatively broad grounds in deciding to grant a licence, including considerations of the potential effect of refusing a licence on the UK’s commercial interests, international relations and collaborative defence projects. These have been substantially cut back and reversed, now providing grounds for the Government to refuse a licence only if the exported items may have a significant negative impact on the UK’s international relations.

The changes concerning military end-use could particularly affect UK exporters of a variety of different items beyond those military or dual-use items that have traditionally been controlled. The effect will be particularly felt by those exporting to China and other arms embargoed destinations, such as Russia. At least such exporters will not, apparently, need to establish new due diligence mechanisms to consider the risk of the use of their goods by the Chinese military or security forces since the licensing requirement will be limited to those who are informed of this risk by the Government.

The impact of the revisions to the licensing criteria will be more subtle and less immediately evident to businesses. But exporters should be aware of the grounds on which their licence applications may be refused in exploring business development opportunities.
 

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Fieldfisher's expert team of trade compliance specialists can help you understand the potential impact of these changes on your business.