Importance of Control List(s) in Strategic Trade Management

Dr. Seema Gahlaut

Delivered at Session 2, the Workshop on Strategic Trade Controls

Taipei, Taiwan, August 27-29, 2013

By Pacific Forum CSIS &

Institute of International Relations, National Chengchi University

What are Strategic Trade “Controls” (STC)?

Most countries have some form of trade licensing regime (e.g., public health and safety, quotas).

STCs are a category within such licensing regimes.

“At present, licences are required for exports of 24 categories of products, including certain agricultural and fish items.”

- Trade Policy Review: Turkey, “Trade Policies and Practices by Measure,” February 2012, World

Trade Organization

Positively defined: STC is a system of laws and procedures that require the licensing of trade in certain items (e.g., dual-use) for reasons of national security, foreign policy, international obligations, and/or economic policy.

Import Licensing Gateway, WTO

Confidential & proprietary. For CITS use only.

Elements of a Strategic Trade Control System:

UNSCR 1540: Directives relevant to STC

Para 1: general commitment to not support non-state actors re WMDs

Para 2: criminalize all activities of non-state actors (unauthorized entities) with regard to WMD-relevant items

Para 3a: appropriate effective measures for nuclear materials control and accounting

Para 3b: appropriate and effective measures for nuclear material protection (physical security)

Para 3c: effective border controls

Para 3d: comprehensive national export controls

Para 6: appropriate control lists Para 8b: international obligations incorporated into domestic laws/regulations

Para 8d: develop appropriate ways to work with industry and public

Para 9: engage in dialogue and cooperation on nonproliferation

Para 10: take cooperative action to prevent illicit trafficking in WMD items

Common Control Lists Already in Operation

Chemicals

o Hazardous chemicals

o Explosives

o Pre-cursors to drugs & psychotropic substances

o Ozone-depleting substances

Dangerous Goods

o Radioactive and fissile materials

o Pathogens

Arms & ammunition

Guns, mortar shells

Riot-control items (tear gas etc)

Endangered species

o Animals & animal products

o Plants

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List-Based Controls: Precision in Guidance

Strategic Trade Management systems NOT aimed at hindering trade

STM systems aim to facilitate industry compliance with security-based regulations

Item, materials, and technologies lists

Precisely defined item-specifications

Examples:

Consolidated List for all technology-types

[EU, US, India, Singapore, Malaysia]

Different Lists for each type of technology

[China]

CONTROL LISTS help * government officials identify which items to regulate [license, enforcement] * industry identify which of its products falls under one of the lists

Sources of Common STC-relevant Control Lists in the world today

Multilateral Regimes established to support implementation of nonproliferation treaties

o Zangger, NSG, MTCR, AG & WA

European Union Common Control List

o EU Dual-Use List

Regional or national controls

o Unilateral

Each of these draws upon information and intelligence about items/technologies that have been

o used by states to develop WMDs in the past [before these were banned by international treaties]

o targeted by proliferators and terrorists for procurement by illegal means

o flagged by industry as becoming WMD-relevant

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Multilateral Export Control Regimes: 2013

Regime Name Established Members Controls

Zangger Committee

(ZC)

1972 38 + EU Nuclear materials &

technologies

Nuclear Suppliers

Group (NSG)

1975 49+ EU +

ZC Chair

Nuclear materials &

technologies

Australia Group

(AG)

1985 42 + EC Chemical and

Biological materials &

technologies

Missile Technology

Control Regime

(MTCR)

1987 34 Cruise and ballistic

missiles &

technologies

Wassenaar

Arrangement

(WA)

1996 41 Conventional weapons

and related dual-use

materials &

technologies

The EU List: Harmonized, Consolidated

Council Regulation (EC) No. 428/2009 includes the control list.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:134:0001:0269:en:PDF

Nuclear SuppliersGroup

National ControlList(s)

EU Dual-Use List

Dual-Use Lists

Australia Group

Missile TechnologyControl Regime*

States may also develop lists for

reasons of national security

Chemical WeaponsConvention

Munitions List

WassenaarArrangement

Captured in EU Code of Conduct on Arms Exports (Common Military List)

Category I

Category II

Cat I systems are complete missile systems & not dual-use.

The US adopted the basic structure of the EU list for its own Commerce Control List (CCL) in 1996.

EU Control List Structure

Technical Categories

0 - Nuclear materials, facilities, and equipment

1 - Materials, chemicals, ‘microorganisms”, and “toxins”

2 - Materials processing

3 - Electronics

4 - Computers

5 - Telecommunications and information security

6 - Sensors and lasers

7 - Navigation and avionics

8 - Marine

9 - Propulsion systems, space vehicles, and related equipment

Multilateral & Unilateral Controls

000 – 099 Wassenaar Arrangement

100 – 199 Missile Tech Control Regime

200 – 299 Nuclear Suppliers Group

300 – 399 Australia Group

400 – 499 Chemical Weapons Convention 500 – 599 Reserved

600 – 699 Reserved

700 – 799 Reserved

800 – 899 Reserved

900 – 999 Unilateral Controls

Product Groups

A - Equipment, Assemblies and Components

B - Production and Test Equipment

C - Materials

D - Software

E - Technology

9 A 350

Example: 9A350: Spraying or Fogging Systems

Integrating the Wassenaar Arrangement (WA)

The WA Dual-Use Goods List is implemented directly into the EU list

Essentially unchanged – just some minor changes in style and layout

EU list categories 1-9 identical to WA categories

1-Materials, Chemicals, "Microorganisms," and “Toxins”

2-Materials Processing

3-Electronics

4-Computers

5-Telecommunications and “Information Security”

6-Sensors and Lasers

7-Navigation and Avionics

8-Marine

9-Propulsion Systems, Space Vehicles and Related Equipment

WA 2.B.4. Hot "isostatic presses" having all of the following, and specially designed components and accessories therefor…

EU 2B004 Hot “isostatic presses”, having all of the following, and specially designed components and accessories therefor…

Avure©Hot Isostatic Press

WA Control Lists: http://www.wassenaar.org/controllists/index.html

U.S. Export Control Classification Number (ECCN)

1 C 210

Category 0: Miscellaneous / Nuclear

1: Materials

2: Materials Processing

3: Electronics

4: Computers

5: Telecommunications & Information Security

6: Sensors/Lasers

7: Navigation & Avionics

8: Marine Technology

9: Propulsion

Product Group

A: Systems, Equipment & Components

B: Test, Inspection & Production Equipment

C: Materials

D: Software

E: Technology

Type of Control

000-099 National Security

100-199 Missile Technology

200-299 Nuclear Nonproliferation

300-399 Chemical & Biological

900-999 Foreign Policy

980-989 Short Supply/Crime Control

990-999 Anti-Terrorism/United Nations

Example: 1C210: Fibrous or Filamentary Material

Trade and Product Codes: Nonproliferation Functions - ECCNs

ECCNs are used to describe performance and/or intrinsic qualities of an item.

The Export Control Classification Number (ECCN) is an alpha-numeric code, e.g., 3A001, that describes a particular item or type of item, and shows the controls placed on that item.

ECCNs were developed to manage the trade in strategic items for reasons other than tariff determination.

In the U.S., for example, ECCN-designated items are controlled for:

- National Security

- Foreign Policy (Anti-Terrorism, Crime Control, Regional Stability)

- Nonproliferation (Nuclear, Chemical/Biological Weapons, Missiles)

Control Lists in Asia: Drawing from the EU List

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JAPAN, SOUTH KOREA, CHINA, SINGAPORE, MALAYSIA, PAKISTAN Follow the EU Common Control List

Dual Use List Categories 0 to 9 Goods with civil and military uses, and can also be used for WMD purposes

SINGAPORE Has added a Munitions List Categories ML1 to ML22 WA categories for munitions Goods and technology specially designed for military purposes

INDIA Follows an adapted EU Control list SCOMET [Special Chemicals, Organisms, Materials, Equipment & Technologies] Categories 0 to 7 Category 6 is currently “Reserved” and will be populated with WA categories for munitions

Major Problem: Disconnect between ST Control Lists & Trade-Lists

“For decades, exporters, forwarders and government have been searching for a

relationship between Schedule B (HS) numbers and ECCN numbers…”

Source: Global Data Mining, Inc. http://www.gdmllc.com/

UK BIS Goods Checker

Source: http://www.ecochecker.co.uk/goodsChecker/BS.asp?bk=1

The Goods Checker, however, does not cross-reference ECCNs with HS (TARIC, in the case of the EU.)

Export Control Classification Systems (Examples)

Country Classification

China HS Code

Hong Kong, India, US, Malaysia

ECCN

Japan, Singapore, Korea

HS Code + ECCN

EU ECCN + HS Code

As a practical matter, more and more countries are developing means by which to link control lists with the

routine trade commercial codes. BUT this remains an extremely difficult – some say impossible – task.

THANK YOU.

QUESTIONS? COMMENTS?

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Dr. Seema Gahlaut sga@uga.edu

Assistant Director

Center for International Trade & Security (CITS)

Suite 120, Holmes-Hunter Academic Building

University of Georgia, Athens, GA 30602. USA

Tel: +1 706 542 2985 Fax: +1 706 542 2975 Web: www.uga.edu/cits