Quality and Methodology Information Report

Strategic Export Controls Licensing Statistics

JULY 2015

Quality and Methodology Information Report

Contents Quality and Methodology Information Report ............................................................................. 1

Contents ........................................................................................................................................ 2

Background ................................................................................................................................... 3

Standard Individual Export Licence (SIEL) Process ................................................................ 7

Processing Statistics ................................................................................................................... 8

Classifications and definitions .................................................................................................... 8

Data processing methodology ................................................................................................... 11

Data quality assurance .............................................................................................................. 11

Data dissemination .................................................................................................................... 11

Revisions .................................................................................................................................. 12

Data Quality ................................................................................................................................. 13

Relevance ................................................................................................................................. 13

Accuracy and Completeness ..................................................................................................... 13

Coherence ................................................................................................................................ 14

Timeliness and Punctuality ........................................................................................................ 14

Accessibility and Clarity............................................................................................................. 15

Comparability ............................................................................................................................ 15

Queries and comments ............................................................................................................. 16

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Background The export of strategic goods and technology is the specific remit of the Export Control Organisation (ECO) within the Department for Business, Innovation and Skills (BIS). It sets out the regulatory framework under which export licence applications are considered, and the Secretary of State for Business, Innovation and Skills takes the formal decision to issue or refuse export licence applications, and where necessary to suspend or revoke extant licences in accordance with the applicable legislation and announced policy.

The FCO (Foreign and Commonwealth Office), MOD (Ministry of Defence) and DfID (Department for International Development) act in a policy advisory capacity, providing ECO with advice and analysis on the foreign, defence and international development policy aspects relevant to consideration of export licence applications against the Consolidated Criteria and other relevant policies.

CESG (Communications-Electronics Security Group), within GCHQ (Government Communications Headquarters), is the UK Government’s national technical authority for information security. It assesses goods involving sensitive communications or computer technology. DECC (Department for Energy and Climate Change) plays a key role in the UK’s biological, chemical and nuclear non-proliferation policy, for example by making sure the UK continues to meet its obligations under the Chemical Weapons Convention (CWC). It assesses goods where there are proliferation concerns. HMRC (Her Majesty’s Revenue and Customs) has responsibility for the enforcement of export and trade controls as well as sanctions and embargoes. HMRC works with Border Force to detect breaches and to pursue prosecutions through the Central Fraud Group within the CPS (Crown Prosecution Service).

The ECO takes two broad approaches to controlling the export of strategic goods. Anyone in the UK wishing to export controlled goods must have either a valid licence or comply with the terms and conditions of an Open General Export Licence (OGEL) in order to export the goods. This is mandated in the Export Control Order 2008, which is the main Statutory Instrument secondary legislation which controls the exports of military and dual-use goods. The Export Control Act 2002 and Export Control Order 2008 provide a statutory requirement on the UK government to control the trade of listed military and dual-use items (which are designed for civilian purposes that also potentially have a military application).

Information on licences is collected as there is a statutory requirement on the UK government under the Export Control Act 2002 and Export Control Order 2008 to control the trade of listed military and dual use items. These pieces of legislation were borne out of international conventions and treaties. There is also EU legislation that the UK government must comply with.

Licences must be obtained from ECO in order for:

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• controlled goods to be exported from the UK

• Controlled goods to tranship the UK

• Controlled goods to be trafficked and brokered from within the UK

Each case includes licences for the provision of technical assistance and for the provision of financial assistance.

More detail on the type of goods requiring licences can be found at https://www.gov.uk/beginners-guide-to-export-controls#do-i-need-a-licence.

More details on recent Strategic Export Control legislation and policy implementation can be found in the Strategic Export Controls Annual Report 2014: https://www.gov.uk/government/publications/uk-strategic-export-controls-annual-report-2014

Data Sources The licensing statistics, “Strategic Export Controls licensing statistics” are derived from administrative records of the ECO. Licence applications are submitted through a tailored online licensing system called SPIRE.

Individual licences are issued following a successful application and allow only those named on the application to export certain goods. Those requiring an individual licence must submit an application to the ECO where they wish to make exports not covered by the terms and conditions of a general licence. There are four types of individual licences:

Standard Individual Export Licences (SIELs)

SIELs generally allow shipments of specified items to a specified consignee up to the quantity specified by the licence. Licences permitting permanent export are generally valid for 2 years from date of issue. Where the export is temporary, for example for the purposes of demonstration, trial or evaluation, the licence is generally valid for one year only and the items must be returned before the licence expires.

Open Individual Export Licences (OIELs)

OIELs are specific to an individual exporter and cover multiple shipments of specified items to specified destinations and/or, in some cases, specified consignees. OIELs covering the export of items entered on the Military List are generally valid for two years, while OIELs covering other items are generally valid for three years.

Standard Individual Trade Control Licences (SITCLs)

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A Standard Individual Trade Control Licence (SITCL) is specific to a named trader and covers involvement in trading of a set quantity of specific goods between a specific source and destination country with a specified consignor, consignee and end-user. SITCLs will normally be valid for two years.

Open Individual Trade Control Licences (OITCLs)

An Open Individual Trade Control Licence (OITCL) is specific to a named trader and covers involvement in trading of specific goods between specific source and destination countries and/or specified consignors, consignees and end-users.

Open General Export Licences (OGELs) are pre-published general licences allowing the export of certain goods to certain destinations. If exporters are eligible to trade under an OGEL then they should register to use that OGEL. Once registered, there is no need for an exporter to submit further applications to trade under the licence they have registered to use. Those exporting under general licences must adhere to the terms and conditions of the licence under which they wish to export. Exporters must register with the ECO to use a general licence and are subject to regular audits to ensure the licence terms and conditions are being adhered to.

Further information on OGELs is available here: https://www.gov.uk/open-general-licences-an-overview#types-of-ogls

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Collection Methodology Despite there being numerous individual licence types, applications are broadly processed in a similar way. The application arrives with the Licensing Reception team and is passed through several other teams, each with a specific audit or checking function. For example, the Technical Assessment Unit assesses the technical aspects of the goods and assigns Control Entries (see ‘Classifications and definitions’) to the goods which helps inform the outcome (eg issue or refuse).

The process diagram on the following page outlines the licensing procedure for a SIEL. Many checks are made by different ECO teams and advisory departments as part of the licensing procedure. Similar details are re-checked prior to final publication of data based upon the licensing information. Information about some licences is also shared with HMRC who make customs declarations via CHIEF (Customs Handling of Import and Export Freight).

A variety of support exists for prospective applicants. Strategic export control training is available, supplied by the Business Awareness Unit (BAU), which includes inductions for beginners. The BAU also supplies thorough guidance on gov.uk (https://www.gov.uk/government/organisations/export-control-organisation) and an ECO helpline operates during business hours for general queries about strategic export licensing. The Compliance Team, responsible for ensuring that licences are being used correctly, also offer advice and support during audits. Each of these helps to ensure that licence applications are completed correctly, which increases the quality of the licensing statistics produced from SPIRE.

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Standard Individual Export Licence (SIEL) Process

Applicant (application)

Licence Reception

Licensing Unit

Applicant (RFIs)

Enforcement Unit

Advisory Departments

Department for Energy and Climate Change (DECC)

Department for International Development (DfID)

Foreign and Commonwealth Office (FCO)

Government Communications Headquarters (GCHQ)

Ministry of Defence (MoD)

Licence Issued

LICENCE REFUSED

Refusal Meeting

Applicant (Appeal)

Appeal Rejected

H.M.R.C. CHIEF

Applicant (exports)

Technical Assessment Unit

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Processing Statistics The processing statistics calculated are based on the initial processing time, ie, the time elapsed from when the application is first received to when it is closed. Closed cases are those where the licence is issued or refused/rejected, or where the application is stopped or withdrawn, or where there was No Licence Required (NLR) decision made on the licence. Revocations apply to existing licences only, so are not counted. Time spent by the ECO waiting for documents from applicants or any time where the ECO are waiting for the applicant to respond to a request for further information is excluded. During this time the application is said to be ‘Returned for Information’ (RFI).

Initial processing time is counted in working days. This calculates the number of working days elapsed between when the application was first received and when it was closed, minus time in RFI. A working day excludes Saturdays, Sundays and public holidays. A business day is counted as a full day if the application was open at any time during the day. That is, the time part of the day is ignored. Days in RFI are counted the same way.

eg if an application is received 10am Monday and a licence is subsequently issued at 5pm the same day then initial processing time = 1 working day. If an application is received at 10am Monday, then Returned for Information on the same day, then the applicant returns the requested information on the same day at 4pm and the licence is issued at 5pm the same day then initial processing time = 0 working days.

Classifications and definitions Strategic goods include military goods and a wide range ‘dual-use’ goods; civilian goods with a military purpose. Goods are assessed against a consolidated list of goods that require export authorisation, available here: https://www.gov.uk/government/publications/uk-strategic-export-control-lists-the-consolidated-list-of-strategic-military-and-dual-use-items-that-require-export-authorisation It is possible for a licence to be for both military and dual-use goods. Control Entries are the codes assigned to each good on the consolidated list of goods that require export authorisation (herein ‘consolidated list’). For example, all control entries beginning ‘ML’ (such as ML1, ML8 etc) are control entries for military goods. The process of assigning control entries to goods is called Rating. In some cases goods can be made subject to control if they do not appear on the consolidated list. Goods that the exporter has been told, knows or suspects are, or may be, intended for "WMD Purposes" are given the rating "End-Use". Goods that the exporter has been told, knows or suspects are, or may be, intended for use as components in, or production or test equipment for, military equipment in an embargoed destination; or may

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be intended for use as parts of military goods illegally obtained from the UK, irrespective of destination, are given the rating "MEND". Both of these “end-use” ratings are also sometimes referred to as “catch all” ratings. Case summaries are text descriptions used to classify goods on licences. They are standardised descriptions to explain what the goods are without giving away commercially sensitive details about the goods (such as design or intellectual property). Using standardised descriptions also facilitates comparison and analysis. Often extra detail is communicated by using prefixes. For example, a replacement part for a sporting shotgun may be described as “components for sporting shotguns” rather than just “sporting shotgun”. One or more Control Entry can be used to rate more than one good on a licence. Also, one or more Case Summaries can be used to describe a single Control Entry.

Goods are rated as Military (ie, they are assigned a Control Entry from the UK Military List within the consolidated list) or they are rated as being Non-military. Non-military goods: • appear on other lists within the consolidated list, such as the UK Dual-Use List.

• also include goods refused to destinations that are placed under sanctions, such as trade sanctions or an arms embargo. Licences relating to the goods affected by the sanction do not get approved but also do not get rated against the consolidated list. They are instead rated with a sanction code, such as ‘RUS’ for Russia and ‘IRN’ for Iran.

Control Entry descriptions are well defined in the consolidated list. A summary of changes to the consolidated list can be found under the full page history on gov.uk (https://www.gov.uk/government/publications/uk-strategic-export-control-lists-the-consolidated-list-of-strategic-military-and-dual-use-items-that-require-export-authorisation#history) Control Entries are verified by the Technical Assessment Unit (TAU). Case Summaries are also assigned by the TAU, based on the design intent. Case Summaries are less well defined (than Control Entries) and therefore classification of goods into Case Summaries is more subjective - although they are selected from an internally agreed list and classification is largely driven by the Control Entry that the goods have been classified with. The list of Case Summaries is generally reissued in response to major legislative changes. Between updates there is often the need to make minor amendments to existing descriptors or add a case summary description for a control entry that hasn’t previously been setup with a descriptor. Case summaries aim to achieve a balance between providing enough detail so that users understand the nature of the good but not disclosing information so that the user knows the exact details of the good.

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SIELs for Goods covered by Council Regulation 1236/2005 (see ‘Licence types and subtypes within the quarterly pivot reports’) concern trade in certain equipment and products which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment. These are classed as non-military goods but appear separately to the statistics on licences for non-military goods. SIELs for Goods covered by Council Regulation 1236/2005 are therefore not included in the count of non-military goods for other SIEL subtypes. More information on the Regulation is available here: https://www.gov.uk/controls-on-torture-goods As noted, goods can also be rated even if they don’t appear on the consolidated list. Licence applications can be Refused (for SIELs) or Rejected (for OIELs). Applications for OIELs get rejected at which point the applicant could apply for a SIEL (clearly, however, the factors that led to the original decision would be taken into account in the decision on any such application), but applications for SIELs are a flat out refusal as there are no other options for the exporter to pursue. Licences are refused/rejected for one or more pre-specified reasons. All applications for licences are assessed on a case-by-case basis against the Consolidated EU and National Arms Export Licensing Criteria and a decision made on either approval or refusal. Depending on the nature of the goods, other policy aspects might also be considered. For example, if the exported goods are due to be incorporated into another system, equipment or plant, then the items are also assessed against the UK’s incorporation factors policy. Applications for licences can be refused if it is deemed to fail one or more of the Consolidated EU and National Arms Export Licensing Criteria. These 8 criteria include, for example, Preservation of regional peace, security and stability (criterion 4) or Respect for the UK’s international obligations and commitments, in particular sanctions adopted by the UN Security Council or the European Union, agreements on non-proliferation and other subjects, as well as other international obligation (criterion 1). More information about the criteria is available here: https://www.gov.uk/government/publications/consolidated-eu-and-national-arms-export-licensing-criteria Licences can also be Revoked at any time after being Issued. Case & goods footnotes are added to certain cases to provide explanation on the end use and/or end user. These are available in the quarterly country pivot report. Country footnotes are added to destinations with the aim to help the user understand why certain goods may have been approved, refused/rejected or revoked in the period. These are available in the quarterly country pivot report and quarterly data tables. The FCO collaborate with the ECO to draft these footnotes. All EU & NATO countries except Turkey are excluded from the footnotes process.

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Data processing methodology

Data quality assurance All applications are processed through SPIRE, so in this way data reports are a census of licences issued, refused/rejected and revoked. No estimation or weighting is necessary.

In addition to the checks made during the licence application processing detailed in ‘Data sources’, several additional checks are made to assure data quality prior to their publication as official statistics.

The Ultimate End-User is defined as the final entity that the exported items will be sent to and normally applies where the items are incorporated into another system (ie, issued SIEL incorporation cases). Exporters have previously been directed to add ultimate end-user destinations on OIELs as Third Parties. In order to be absolutely clear that these are ultimate end-users, and not just third parties involved in the export, an ‘Ultimate End-Users’ application screen was introduced in February 2015. Up until this point, third party information went through thorough checks to ensure they had been recorded correctly.

The Incorporation status of licences granted is also checked prior to publication to make sure that the undertakings are comprehensive enough.

Any re-opened cases are also reviewed before data are published each quarter.

Data dissemination Applicants must supply their name and address. As such, it is potentially possible to compile statistics based on geographic sub-regions of the UK, such as countries and counties. However, SPIRE is not set up to readily report this way.

All licences are reported on quarterly, except a small number of more specialist licences, as these are not processed in a standard way. Information available on these licence types are published alongside quarterly data in the ‘Other Standard Licences’ table.

Quarterly data relating to the following has been published each quarter since 2008Q1:

For each destination and for each of Issued, Refused and Revoked the following is data is presented quarterly, where available, for each SIEL subtype: • A count of the number of licences on which goods were Issued, Refused or

Revoked categorised by the type of goods on the licence; Military, Non-military or Both Military and Non-military

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• A count of the number of licences on which goods were Issued, Refused or Revoked per Control Entry. Control Entries are presented per category (Military, Non-military or Both Military and Non-military) based on the licence they relate to.

• Data for Issued SIELs includes the value of the goods in each category.

• Case summaries for each of Issued, Refused and Revoked broken down by category (Mil/Non-mil/Both).

• The ultimate destination/s for goods that are being incorporated.

• For refusals, the number of times each of the 8 Consolidated EU and National Arms Export Licensing Criteria are used to refuse licence applications for the destination is provided.

Case Summaries for goods Issued, Rejected and Revoked for OIELs. The number of SITCLs and OITCLs is Issued, Refused/Rejected and Revoked is also supplied.

The ECO encourage applicants to use open licences where possible. When standard individual licences are used, applicants are encourages to keep the number of applications to a minimum (eg grouping goods on a single licence rather than splitting them unnecessarily over multiple licences).

The data published each quarter is based on a snapshot of licensing data from SPIRE, generally taken 2-3 weeks before publication. This is to allow compilation of the data tables and statistical commentary. The snapshot date is provided on each release. In addition to data for a previously unpublished quarter being made available each quarter, all historical PDF country pivot reports are revised whenever there have been amendments.

ECO believe that the licensing data published are insufficient to allow the identity or personal details of a licence applicant. Issued licences are not a measure of goods exported. The quantity of goods on an issued licence may not be shipped in its entirety (or even at all).

From January to July 2015 a review was conducted by the ECO to assess the statistics against the Code of Practice for Official Statistics. Following this review, the statistics are believed to be fully compliant, but have not yet been assessed by the UK Statistics Authority, the independent body responsible for assessment of official statistics against the Code.

Revisions Please see the Revisions Policy published here: https://www.gov.uk/government/collections/strategic-export-controls-licensing-data

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Data Quality The European Statistical System sets out six dimensions of quality against which data can be assessed:

Relevance (the degree to which the statistical product meets user needs for both coverage and content)

The Strategic Export Control licensing statistics includes all licence applications on which the ECO has made a decision to issue, refuse/reject or revoke, since 1 January 2008. It covers applications made for all controlled goods for export from the UK, or exports being brokered by applicants in the UK.

There are numerous users of the data. In government, the following departments use the data to inform their operations:

• Foreign and Commonwealth Office (FCO)

• Ministry of Defence (MOD)

• Department for International Development (DfID)

• Department for Energy and Climate Change (DECC)

Data are supplied for use in the annual report on Britain’s export control policy and practice during the year. Published by the FCO, it is a collaboration between the FCO, BIS, DfID and the MOD. The 2013 report is available here: https://www.gov.uk/government/publications/strategic-export-controls-annual-report-2013

Additionally, the Committee for Arms Export Controls (CAEC) examine the Government's expenditure, administration and policy on strategic exports. The licensing statistics inform their work. More information of the CAEC is available here: http://www.parliament.uk/business/committees/committees-a-z/other-committees/committee-on-arms-export-controls/role/

Outside government, NGOs such as Campaign Against the Arms Trade (CAAT) and Amnesty International use the data to monitor strategic exports. Academic and research institutions such as Export Control Advisory Committee (ECAC) and Export Ground for Aerospace & Defence (EGAD) are also known to use the statistics.

Accuracy and Completeness

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(including the closeness between an estimated or stated result and the [unknown] true value)

The licences covered by the data are intended to be are a census of licences issued, refused/rejected and revoked for the ECO.

Numbers of cases are based on the date the licence decision was made (when the case was closed). Depending on the age of the licences, some may still be live (extant) whereas others may have expired or been surrendered by the applicant.

Checks are in place to identify and remove duplication of cases, to ensure that returns cover all reporting areas, and to check consistency within data tables and between related data tables.

Coherence (the degree to which data which are derived from different sources or methods, but which refer to the same phenomenon, are similar)

The status of a licence can change over time, eg, an issued licence may be revoked. Any amendments made to licences are revised in historical PDF country pivot reports at the time of each quarterly publication, so the full data series back to 2008Q1 are complete (as per the snapshot of data).

Timeliness and Punctuality (Timeliness refers to the elapsed time between publication and the period to which the data refer. Punctuality refers to the time lag between the actual and planned dates of publication.)

Data from each quarter are published roughly 3 and half months from the end of the quarter. For example, data relating to Q1 of 2015 (1 January 2015 – 31 March 2015) was published on 21st July 2015. A snapshot of licensing data from Spire is generally taken 2-3 weeks before publication to allow time for the publication outputs, such as the data tables and statistical commentary, to be compiled.

This is the earliest publication date which ensures enough time to quality check the data, whilst allowing enough time to elapse so that the data can be shared with confidence. To release data sooner may allow information to be utilised to affect market activity, eg publishing licence details in real-time could allow competitors to track issued licences, which could give an indication of business activity.

There is a publication schedule for a year ahead available on the UK National Statistics Publication Hub (https://www.gov.uk/government/statistics/announcements).

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Accessibility and Clarity (Accessibility is the ease with which users are able to access the data. It also relates to the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of metadata, illustrations and accompanying advice)

The Strategic Control Export licensing statistics are available free of charge here: https://www.gov.uk/government/collections/strategic-export-controls-licensing-data. They are released via the Publication Hub and from January to July 2015 a review was conducted by the ECO to assess the statistics against the Code of Practice for Official Statistics. Following this review, the statistics are believed to be fully compliant, but have not yet been assessed by the UK Statistics Authority, the independent body responsible for assessment of official statistics against the Code.

All published statistical releases meet accessibility requirement for publishing on gov.uk.

Comparability (the degree to which data can be compared over time and domain)

Changes over the years can affect the data such as export control policy changes or operational change to Spire. These are detailed in the Excel data tables and commentary.

Changes in export control policy changes or operational changes to Spire can affect the extent to which comparisons can be made over time for individual data series. Where such changes are known, they have been highlighted in explanatory notes at the bottom of the tables in the accompanying Excel files and highlighted in the statistical commentary.

Operational changes to SPIRE are managed through a formal change management process. Changed are thoroughly tested on the system before they are applied to the live system. Changes were made in July 2015 to accommodate the production of the data to comply with Code of Practice for Official Statistics (as judged by ECO, not formally assessed). For example, the country pivot report publication process was adjusted to allow controlled release to gov.uk at the time and date pre-announced on the UK National Statistics Publication Hub.

Comparatively, the statistics produced by the ECO offer more transparency than similar statistics produced by most other countries assessed for transparency. The Small Arms Trade Transparency Barometer uses seven categories to score statistics on trasparency: (i) timeliness, (ii) access and consistency, (iii) clarity, (iv) comprehensiveness; (v) deliveries, (vi) licences granted, and (vii) licences refused. The Transparency Barometer 2014 ranks the UK to 4th position using its assessment of transparency: http://www.smallarmssurvey.org/weapons-and-markets/tools/the-transparency-barometer.html

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Queries and comments If you have any comments, feedback or queries about any of the information provided in this report, please email ECO.statistics@bis.gsi.gov.uk.

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