UK Rejects Call for More Export Enforcement Transparency, Post-Shipment Verification

The U.K. last week declined requests from Parliament to disclose more information about export control violations, saying it doesn’t believe the transparency will aid compliance or boost voluntary disclosures. The U.K. also said it’s bound by certain “confidentiality” requirements, including rules that limit the Department for International Trade’s Export Control Joint Unit (ECJU) from releasing names of companies that have violated export restrictions.

His Majesty’s Revenue & Customs “does not consider that disclosing individual company names would drive compliance, promote voluntary disclosure or be proportionate in this case,” the U.K. told Parilament's Committees on Arms Export Controls (CAEC) in a response released this month to a CAEC report on strategic export controls. “Therefore, [His Majesty's Revenue and Customs] does not believe that disclosure is in the public interest.”

The U.K.’s secrecy surrounding its export enforcement actions differs from U.S. Bureau of Industry and Security and other U.S. agencies, which regularly publish export enforcement news releases to help educate industry about government compliance expectations. BIS further liberalized its administrative enforcement procedures last year when it began publishing charging letters before cases were resolved (see 2206030012, 2206300069 and 2205230018).

The U.K., however, is selective about the information it releases. The country last year fined a British company a record $3.5 million for illegally exporting military goods but didn’t publish details about the violations, including the name of the company (see 2204190073). The U.K. also declined to provide the CAEC a closed briefing on the violation.

“[W]e see no reason why data such as the name of the company, the item being exported and the destination, cannot be provided to us privately to allow us to undertake effective scrutiny,” the CAEC said in its report. “We also recommend and expect that where unlicensed goods have reached their destination the Government inform us, in private if necessary, of the steps taken to recover the items.”

The U.K. said the “recommendation to provide data, even in a private manner, on settlements is not something HMRC can agree to.” Its enforcement efforts are subject to “confidentiality” requirements, which “prevent the release of certain information to others or into the public domain,” said the U.K.'s response to CAEC, which was submitted by several senior U.K. officials, including the secretaries of state for international trade and defense. “This includes information that could identify companies that have been found non-compliant.”

Mark Garnier, chair of the CAEC, said it’s “disappointing that the Government and HMRC have refused to provide confidential information to the Committees on large compound settlements or details on companies found to be non-compliant.” He also said it’s “deeply disappointing” that no U.K. secretary of state has been willing to appear before the committees.

“There are many areas of policy that straddle multiple departments, yet are still effectively scrutinised by parliamentary select committees,” Garnier said. “Arms export controls is no exception to this and departments must be willing to send their Secretaries of State.”

The U.K. said ECJU will “consider how best to present information in our Annual Report that improves the transparency of the compliance process.” It also said it will begin including data on convictions related to export control violations in future annual reports.

But the U.K. won’t begin a post-shipment verification process to ensure U.K. exports aren’t being diverted to illegal end-uses, the country said. It said it has “yet to see any clear evidence” that post-shipment checks “are effective in reducing diversion,” adding that establishing the process “would incur significant costs, require additional resources and expertise, and raises legal, diplomatic and practical issues which must be balanced against any perceived benefits.”

The CAEC disagreed, saying “the lack of progress on this matter is disappointing,” especially because “end-user assurance documentation” provided by an exporter may not always be reliable. “We see no reason why the Government should not recommence its discussions with the German authorities and seek to reinstate the aborted talks with US authorities on post-shipment verification,” the CAEC said, suggesting the U.K. create a post-shipment verification pilot program by 2025.

The U.K. declined. “While we retain an open mind on the issue and will continue to examine the experience of those countries that carry out such checks, we cannot commit to implementing a pilot programme by 2025.”

The CAEC also said it’s “concerned” about the “increase in recent years of the numbers of companies found to be non-compliant” with U.K. export controls. The ECJU said it takes compliance “seriously” and focuses its efforts on “new exporters” and exporters with previous compliance concerns. This approach “naturally lead[s] to higher rates of non-compliance being found, especially in routine compliance visits,” the U.K. said.

The country also touted its “compliance visits” with companies exporting sensitive items, which it said have helped prevent violations. “The effectiveness of such compliance visits is demonstrated by the significant reduction in non-compliance during revisits: an 86% reduction in 2019 and 2021, and 88% reduction in 2020,” the U.K. said.

The government agencies also answered questions about its strategic export licensing regime, saying it has “found no evidence” that licensing regimes of the U.S, Germany, France or Sweden “were substantially more effective or efficient than our own.” Still, the U.K. said it plans to amend its licensing regime criteria “to more closely align with our international legal obligations and to better reflect the Government’s strategic export objectives.”

The U.K. also rejected a call from the CAEC to conduct an independent review of its licensing regime. “The Government ... does not consider an independent review to be necessary or proportionate,” the U.K. said.

The CAEC pointed to what it said are “continued delays” involving LITE -- the U.K.’s new digital export licensing system. The U.K. government said the “delivery of the LITE service is being progressed urgently,” calling it a priority for the Department for International Trade. LITE is currently “issuing licenses to a select number of exporters who have been invited to use and test the service,” the government said, but declined to give a timeline for when it will be fully operational.

“It will be delivered through a phased set of cohorts to allow for improvements to be made before it is released to the entire exporter community,” the U.K. said. The government added that it will give the CAEC monthly updates on the LITE rollout.

The U.K. acknowledged CAEC concerns that ECJU has struggled to recruit employees, including compliance officers. “[I]t can be challenging to recruit certain types of specialist or technical expertise,” the U.K. said, but added that it’s made “positive progress in filling its vacancies across a range of teams.”

The ECJU has five trained compliance inspectors and is recruiting three more, the U.K. said. The agency also recently hired staff from industry and the military and expects to soon have “access to a wider pool of talent across the country.”

The report includes the U.K. government’s answers and comments on a host of other questions from Parliament, including emerging technology controls, Russia trade restrictions and controls applied to other “countries of concern.” The report also includes an annex, beginning on page 21, detailing licensing decisions for exports to Israel from July 2017 to June 2022.