The type of approval from the ECJU (Export Control Joint Unit) can vary between approvals such as Open General Export Licences or the post-Brexit Dual Use OGEL equivalent, the Retained General Export Authorisation. The simple registration process required to use these licences shouldn’t divert the exporter from understanding their responsibilities. Specific Terms and Conditions, the requirement for certain documentation or evidence, Open Licence Returns and an ECJU Audit are mandatory compliance responsibilities. Alternatively, an application could be required in the format of a SIEL (Standard Individual Export Licence) or an OIEL (Open Individual Export Licence), offering the exporter greater flexibility in terms of goods and acceptable locations but with a longer processing time for the ECJU to accept the application.

Due Diligence underpins export control compliance. Understanding if the goods, technology, or software are controlled and are, therefore, licensable is a legal requirement. But goods and items that are not controlled could still require a licence from the ECJU SPIRE Portal for various other reasons.

• End Use Concerns: the supply of goods to produce Weapons of Mass Destruction, including Chemical, Biological, and Nuclear Weapons.

• Military End-Use controls: The UK Government has recently updated Military End-Use controls. In this example, it isn’t sufficient for the exporter to say that the goods are not controlled under the military list. Military End-Use controls can apply when supplying to an embargoed country the exporter is aware of, or the ECJU informs them that the items to be supplied are for incorporation into Military Goods. Being told means a communication from the ECJU via the exporter’s SPIRE portal that a licence is required. The exporter being aware will take us back to the importance of Due Diligence - understanding the goods and knowing the end use and the end user.

It is important to stress that the exporter, identified by their GB EORI (Economic Operator Registration and Identification), must obtain the necessary licence.  In some cases, the exporter may not own the goods they are sending out of the UK; the product could be exported, e.g., after repair, checking or testing, but the entity named on the customs declaration as the consignor must obtain the licence. SPIRE recognises the importance of export and customs compliance by requiring that the licensee’s EORI is documented in the “Organisation Details” of the licence portal.

The exporter, which in many cases is also the supplier or manufacturer of the goods, must be aware of parties trying to circumvent export control regulations. This element of export control compliance (or potential non-compliance) takes us into the world of Red Flags, a warning that an export control violation could occur. This could entail some detective work by the exporter. Still, when the vehicle has arrived to collect the consignment to begin the export process, the EORI holder is confident about where their goods are destined and for what purpose the goods will be used and by whom. It is not impossible to request the driver to return to the point of loading if there is a doubt, but it can be difficult. Exports documents can be checked by HMRC (the National Clearance Hub), or Border Force can physically check goods, and there have been multiple examples of consignments being seized due to export control concerns when no licence has been declared by the exporter.

What could constitute a red flag? There are a variety of potential areas that could cause concern. There could, in theory, be more than one red flag to investigate. In many instances, there are deadlines set by the seller, the business or the company that will collect the consignment. Still, it is essential to err on the side of caution and make the relevant due diligence checks prior to the goods being loaded onto the vehicle.

What do we know about the customer? New business is excellent, but a company we don’t know with no trading history could be cause for concern. Financial checks are made when considering payment times for a new customer. Do those checks bring any information to light that may require further investigation? Does the company have a website? Does the contact have a company email address, or is it a generic address such as a Hotmail domain name? In a world that changed with Covid, we have switched to working remotely with Zoom and Teams, and mobile phones are primarily being used instead of business landlines. But does the customer enquiring solely have a mobile, or are there any clues on their email signature? Often, a business uses its email signature to promote its services or a future event such as a trade show. If there isn’t a website stated in the email, what is it? If there is a simple “thanks & regards” and the individual’s name, though it could be OK, does give enough of a link to an overseas company. Many of us will send emails from our mobile phones, but it could also be something to investigate further—a potential point to explore.     

Even before those checks are made, is our customer the end user? Who is, and where are they based if they aren't the end user? An excellent place to start could be to request that a SIEL End User Undertaking is completed. This will clarify the relevant parties and provide a solid foundation for the next steps.

Have Incoterms® Rules been discussed? EXW is always an area of concern; many EXW shipments are FCA (Free Carrier) in all but name, which is safer as the seller is responsible for export documentation, including the licence requirement. Would the exporter prefer to deliver to the customer under C or D Terms?       

Does the delivery address mean the goods are destined for a freight forwarder or a transport company? If this is the case, it is a significant proliferation red flag and would be an instant concern, but it could be less evident than that. Is a delivery address supplied and then changed at short notice? Is there a vehicle in the area by chance, and DAP switches back to EXW or FCA? This could be harder to manage and spot within the daily activities of a busy shipping department and warehouse. Deliveries to a Customs Free Zone are not allowed under the terms of an OGEL; this suggests unease as to the level of customs control in and out of the location and is a proliferation concern.   

Payment terms could be Cash in Advance based on a lack of trading history or the buyer’s choice. Is the latter option acceptable? In many instances, Cash in Advance (hopefully not money in a suitcase left in reception) is seen as a huge benefit, giving the supplier minimal risk. OFSI, the Office of Financial Sanctions Implementation, administers financial sanctions as part of HM Treasury. If a trade is subject to financial sanctions, OFSI approval is required before the business can proceed. This could be necessary in addition to ECJU approval. If the sale is paid for in advance, who has made the payment?     

Is your customer (or potential new customer) vague on various information and the questions you ask as part of your due diligence? Do the goods to be supplied and the purchase country match your experience with previous buyers?     

If we consider Military End Use controls, there could be related businesses with very specific production activities, one of concern, the other manufacturing a product for the domestic market. Which factory are your goods destined for?

How far must we go? (in our checks) is a popular question. The answer in many instances is “it depends”, as many variables could mean further checks are needed, but this needs to be factored in by the exporter. If challenged, the exporter must be able to show that they have carried out a level of Due Diligence, which means they had no doubts regarding the supply of goods before the consignment leaves their premises. A licence and export control compliance must be considered as early as possible.   

If our business trades internationally, we (as a company) need to be aware of our compliance responsibilities. This will vary depending on your job role and the types of products that you export, but this world of trade compliance continues to change and evolve. We haven’t discussed the end of LIC99, a game-changing moment when we eventually wave goodbye to CHIEF (Customs Handling of Import and Export Freight), meaning that specific controls based on the Commodity Code(s) declared will apply.         

Export Control compliance will never work if one person is responsible; it must be a team effort supported by senior management to ensure compliance by checking those red flags.     

While you are here you may be interested in some Strong & Herd LLP training courses & live clinics related to this topic:

Beginners Guide to Export Licensing Controls

Applying for and Using UK Export Licences

The UK Export Licensing System

Focus On: Controlling Technology & Intangible Transfers

Focus On: Embargoes, Sanctions and End-Use Controls

Focus On: Dual Use Export Compliance - The Dual-Use Exporter

Focus On: Preparing for an Export Control Audit