UK, US Sanctions Conflicts Creating Confusion Over UK Exports Containing US Content

United Kingdom companies are facing challenges navigating sanctions conflicts between the U.S. and the United Kingdom, which is leading to confusion over which items they can legally export, according to Roger Arthey, chair of the Institute of Export & International Trade’s Export Control Profession and the former head of export control compliance for Rolls-Royce. Those challenges were complicated by the U.S.’s withdrawal from the Joint Comprehensive Plan of Action in 2018 and the introduction of the European Union Blocking Regulation, which blocks EU businesses from complying with certain U.S. sanctions (see 1906240014).

“Organizations are faced with the decision of whether to not comply with the U.S. regulations or to not comply with the U.K. regulations,” Arthey said, speaking alongside officials from the U.K.’s Department for International Trade during a Feb. 19 webinar hosted by the institute. “You don’t want to be caught in that situation if you can avoid it.”

Arthey said there has been “quite a lot of discussion going on at the moment” among U.K. companies about sanctions conflicts due to confusion over where U.K. exporters can sell their goods if they contain U.S.-origin content. While the U.K. is still a party to the JCPOA, for example, the U.S.’s withdrawal from the deal and its long list of sanctions against Iran could apply to foreign-made items in the U.K. that contain U.S. content. “It could well be that those U.S. items are embedded into European items that are being exported to Iran legitimately,” Arthey said. In this instance, he added, companies may be complying with EU regulations while violating U.S. sanctions. Similar concerns will likely arise if the U.S. Commerce Department follows through on discussions to expand the de minimis and Direct Product rules to further control foreign exports containing U.S. content (see 2002050047).

U.K. companies should review whether there is any U.S. “design content” in their exports and whether their exports were designed in the U.S. or by a “joint team” between the U.S. and the U.K. Companies should also closely monitor U.S. sanctions and denied party lists, Arthey said, which he said change almost daily. “A fair amount of analysis needs to be done there to determine whether an item produced in the U.K. is or is not subject to U.S. regulations,” Arthey said. “Just keeping track of your exports and whether they are caught by those regulations can be quite difficult.”

Companies should also not assume U.K. classifications of goods are identical to U.S. classifications, Arthey said. He said he has “come across a number of situations” in which items classified in the U.K. as military goods are classified as dual-use in the U.S., which would impose separate license requirements. U.S. regulations “require quite a lot of attention and understanding in order to comply with them,” Arthey said.

During the webinar, DIT officials added that many U.K. companies have asked for guidance on U.K. laws surrounding technology transfers, including export controls on tech transfers that are “intangible.” A DIT official said the agency is updating its guidance for tech transfers and plans to release it soon. Claire Harrison, an official with DIT’s Export Control Joint Unit, said the U.K. also plans to launch the first phase of its new electronic licensing system in April. The Licensing for International Trade & Enterprise (LITE) platform, which will replace the Shared Primary Information Resource Environment (SPIRE), will go live in “tranches,” Harrison said. “We’ve made significant progress on it,” she said. “So please look out for that.”