EU Needs Better Export Control Enforcement Amid Growing Trade Complexities, Report Says

The growing complexity of international trade and the increasing use of front companies have made it more difficult to identify end-users and more challenging for enforcement authorities to prosecute illegal exports, according to a December report by The Stockholm International Peace Research Institute. In response, the European Union, and other multistate export regimes, should push for more transparency in penalties for export violations, create a forum for information sharing on national enforcement measures and improve reporting on those measures, the report said. The EU should also adopt “clearer” language on complex export concepts and make “detection, investigation and prosecution” a “key focus” of its industry outreach efforts.

An increasing number of complex technology transfers, spurred by “rapid technological advances,” are “now far harder to detect,” the report said. While EU member states have tried to keep up by imposing export controls on “new activities and items,” better “tools and techniques” are needed to ensure enforcement, the report said. EU member states should create a “dedicated unit” within their customs authorities that focuses on dual-use and arms trade controls, the report said, which has already proved successful in several EU states, including Germany, the Netherlands and Britain. But merely creating those units will not lead to better enforcement, the institute said -- countries need to make sure the units have the “resources and mandate to operate effectively,” which requires recognition from a “senior level” of the importance of export control work.

The institute also recommends that customs authorities introduce a “mechanism of risk profiling” instead of randomly examining exports for possible dual-uses. It is “often difficult” for customs agents to identify dual-use goods, especially due to the “enormous” amount of goods crossing borders and the fact that most shipments are never seen by an agent and “remain in a sealed container.” A targeted, planned risk profiling approach will give authorities a “realistic chance of identifying and intercepting unlicensed shipments,” the report said. This approach involves gathering information from “different sources” within its state and other EU states to better understand and identify which goods need more examination. But this approach may disadvantage EU members whose export control regimes do not have access to “information sharing.”

But as important as electronic information sharing is, the ”human factor” is also important, the report said. Customs authorities should consider allocating more time and resources for training. “It is impossible for every single customs officer to have the specialist knowledge required to know whether a particular shipment is controlled by one of the many categories of the military and dual-use control lists,” the report said. “At the same time, it is essential that customs authorities have” sufficient training to “identify suspicious consignments,” access to “specialized teams ... who have experience, in-depth training and possibly security clearance,” and “access to authoritative technical assessments from the licensing authority.”

Customs authorities can also take steps to increase detection and investigation of illegal brokering activities through regular audits and inspections, the institute said. Information on brokers can usually be obtained through “open sources” and through audits of dual-use and arms exporters. “Good cooperation” between licensing, enforcement and intelligence authorities can also lead to detection of illegal brokering activities.

To better increase enforcement and reduce confusion about differing penalties between member states, the EU should create a “mechanism” for “more detailed comparison and analysis of national practices,” which may help “develop common perceptions as to what penalties are appropriate.” The EU should also create an “informal network of investigators and prosecutors” to encourage information sharing. This could include regular presentations on past and ongoing export control cases and development of guidelines and good export practices

The report also contains a series of case studies and lessons that can be learned from past export violations, including sales of machine tools from Spain to Iran, gas turbines from the Netherlands to Iran, and chemicals from Belgium to Syria.