Sources of Control in Foreign Trade

Overview

The key points in brief:

  • Export controls call for internationally coordination
  • UN sanctions and International Export Control Regimes determine extensive frameworks
  • National and EU regulations and implementing administrative provisions determine the practice of export controls

Explanations:

National export control law is largely impacted by international frameworks. The objective of export control calls for internationally coordinated controls. Ideally, the same rules apply in all industrialized countries.

UN sanctions aim to delimit the measures imposed by States and other intergovernmental organizations, which are obliged to take implementing action. International Export Control Regimes work out lists of controlled goods, procedural rules and enable an exchange of information. Within the EU, the trade of dual-use goods is largely governed by European regulations, while the regulation of trade in arms, munitions and war material is largely the responsibility of the Member States (National / European Law). Administrative regulations at both national and European level often determine the practice of export controls.

United Nations Economic Sanctions

The key points in brief:

  • UN Security Council imposes sanctions to maintain or restore international peace and security
  • States are obliged to take implementing action
  • Embargoes on arms and related material and trade restrictions are the most frequently used tools

Explanations:

To maintain or restore international peace and security, the UN Security Council may impose measures including economic sanctions in case of threat to the peace, breach of the peace, or act of aggression. These measures may not involve “the use of armed force”, but expressly cover “complete or partial interruption of economic relations” (Art. 41 UN Charter). Since the 1990s, catching up the collapse of the Eastern bloc, UN economic sanctions have become a common instrument of peace maintenance. They aim to delimit the measures imposed by States and other intergovernmental organizations, which are obliged to take implementing action. The UN Security Council has developed a wide range of instruments. Particular in the economic sphere embargoes on arms and related material and trade restrictions are the most frequently used tools, in particular limited to specific goods deemed to be crucial to the target of the measures.

Background

Sanctions under Art. 41 UN Charter explicitly exclude actions involving the use of armed force. The rise of UN Economic Sanctions the collapse of the Eastern bloc with newly imposed sanctions on Iraq, the Former Yugoslavia and Haiti generated remarkable damaging side-effects on the civilian population, especially in the case of Iraq. Since the mid-1990s a more precautious approach by ”targeted” or ”smart” sanctions was used to leave innocent bystanders unaffected as far as possible and to hit those responsible. New embargoes were often limited to arms and selected crucial goods (e.g. diamonds) and specific individuals were targeted by freezing their assets as well as by prohibitions on international travel. These measures indeed had a less adverse impact on the civilian population. However, their effectiveness was limited, too.

With the millennium change the focus shifted towards more effective implementation mechanisms. The establishment of subsidiary bodies to identify sanctions violators and tackle structural problems and the development of best practices improved the effectiveness of the sanctions. Particularly after 9/11 the use of sanctions expanded further with the surge of anti-terrorism measures. Measures on the financing of terrorism were extended. Embargos against persons came to be applied to several hundred persons, entities and organizations. Target identification and sanctions management have therefore become an increasing challenge in the course of time.

UN Economic Sanctions remain frequently used instruments, with an increasingly preventive approach as enforcement measures. The mandatory force of non-military enforcement measures has quite rightly (see Art. 39, 103 UN Charter) been repeatedly emphasized by the UN Security Council. But if a particular resolution provides for binding measures is always subject to interpretation on a case-by-case basis. If it does, UN Security Council measures override from the perspective of public international law other obligations of Member States (Art. 103 UN Charter).

Links:


International Export Control Regimes

The key points in brief:

  • The basis of international export control rules as legal frameworks
  • Work out lists of controlled goods and procedural rules
  • Platforms for the participating countries, where they can share information

Explanations:

Four International Export Control Regimes can be designated as the basis of international export control rules. These multilateral regimes have committed themselves to the prevention of the proliferation of weapons of all kinds. They work out lists of controlled goods, procedural rules (also for information exchange) and enable an exchange of information on an international political level. The regimes constitute legal frameworks

  • on export controls for conventional arms and dual-use goods and technologies (The Wassenaar Arrangement, WA),
  • to control the spread of missiles and missile related technology, as well as systems intended for the delivery of weapons of mass destruction (Missile Technology Control Regime, MTCR),
  • to control nuclear and nuclear-related exports and technologies to prevent the proliferation of nuclear weapons (Nuclear Suppliers Group, NSG) and
  • to ensure that exports do not contribute to the development of chemical or biological weapons (The Australian Group, AG).
Regime Wassenaar Arrangement (WA): Missile Technology Control Regime (MTCR): Nuclear Suppliers Group (NSG): The Australian Group (AG):
regulates Conventional arms and Dual-use Missiles Nuclear Chemical and Biological
last three digits of the five-digit ECCN/Dual-use position 001-099 101-199 201-299 301-399

The International Export Control Regimes have a strong influence on European and national export controls by the developing common lists of goods, the continuous exchange of information about sensitive end users and projects and mutual consultations on technical procedures and approval questions between the Member States. The regimes are indispensable for effective export controls, as they constantly push ahead with the necessary harmonization of export controls.

Note: For certain positions in the lists of goods (001-399) the last three digits of the five-digit ECCN/Dual-use position can be used to denote their origin: 001-099: WA; 101-199: MTCR; 201-299: NSG; 301-399: AG.

Wassenaar Arrangement, WA

The control regime of the Wassenaar Arrangement (WA) was established in 1996 in Wassenaar, the Netherlands, and serves to meet threats to international or regional peace through unrestrained deliveries of conventional arms and corresponding dual-use goods and technologies. The aim is also to prevent the acquisition of these items by terrorists. The Secretariat is based in Vienna, Austria.

Participating States apply export controls to all items set forth in the List of Dual-Use Goods and Technologies and the Munitions List, with the objective of preventing unauthorized transfers or re-transfers of those items. To assist in developing common understandings of transfer risks, participating States regularly exchange information of both a general and a specific nature. They are required to report their arms transfers and transfers/denials of certain dual-use goods and technologies to destinations outside the Arrangement on a six-monthly basis. In some cases, shorter reporting time-frames apply.

In terms of content, the regime is based on the COCOM regime, established by Western bloc powers after the end of World War II, but is not aimed at specific target countries. It is intended primarily to provide new and up-to-date control needs. Its list of goods mainly covers conventional arms and corresponding dual-use goods. The WA currently includes 41 participating states. Russia and other countries of the former Eastern bloc in particular have joined the former Western bloc COCOM member countries.

Missile Technology Control Regime (MTCR)

The goal of the MTCR, founded in 1987, is to coordinate national export licensing efforts aimed at preventing proliferation of unmanned delivery systems capable of delivering weapons of mass destruction. These missiles represent a special threat to international security. This regime currently comprises 34 countries.

The MTCR maintains a control list with two categories. Category I includes rockets capable of transporting a 500 kg rocket head 300 km or more, such rocket launchers, missile subsystems, unmanned aerial vehicles, and related technology. Member States have undertaken to refrain from exporting these products in principle. Category lists Dual-use goods in connection with missiles, for which a restrictive licensing policy is pursued.

Nuclear Suppliers Group (NSG)

The aim of the Nuclear Suppliers Group (NSG), founded in 1975, is the non-proliferation of goods that can be used for the development and production of nuclear weapons. At present, 48 countries are members of the control regime, including all major suppliers of nuclear material, in particular Russia and China. NSG supplements the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) from 1968. The NSG has issued Guidelines for the export of nuclear goods and dual-use goods.

  • NSG Part 1 Guidelines: Part I of the guidelines lists goods that can be used solely for the manufacture of nuclear weapons, for uranium enrichment or for the construction or operation of nuclear installations. The export of these goods may only be authorized if an authority declaration of the country of destination states that the goods are not used for the production of nuclear weapons. In addition, the physical protection of the goods must be ensured and there must be a safeguards agreement between the country of destination and the IAEA.
  • NSG Part 2 Guidelines: Part II of the Guidelines covers dual-use goods, which can be used for other purposes as well as for nuclear technology purposes. For these goods, an authorization may only be granted if a nuclear use is excluded or only under the control of the IAEA.

The Australia Group (AG)

The Australian Group (AG) aims to prevent the production of chemical and biological weapons. AG was founded in 1985, after chemical weapons were used in the First Gulf War. It currently consists of 41 countries and the European Commission. The control list includes chemicals, chemical manufacturing equipment, biological agents, toxins and biological manufacturing equipment. The criterion for granting authorizations is whether there is a risk of using biological or chemical weapons.

Links:


National / European Law

The key points in brief:

  • International frameworks need to be implemented into self-executing European respectively national law
  • Legally binding prohibitions and approval requirements can solely be stipulated by European or national law
  • The law of trade in arms and war weapons and the law of criminal offenses ist even within the EU still regulated nationally

Explanations:

The mentioned international frameworks of the UN and Control Regimes are not self-executing. They still need to be implemented into self-executing European respectively national law. Legally binding prohibitions and approval requirements can only be stipulated by European or national law.
Supplementary European or national administrative regulations obtain implementing rules and guidelines for a uniform application. At European level, various embargo regulations and the EC Dual-use Regulation are the defining regulations. Whereas the law of trade in arms and war weapons is regulated nationally, as it is the case for criminal offenses. In the U.S., many U.S. Economic Sanctions exist only under executive orders, codified in 31 C.F.R. Chapter V. The International Traffic in Arms Regulations (ITAR) regulates defense trade whereas The Export Administration Regulations (EAR) virtually regulate all items not regulated by the ITAR, especially dual-use goods.

EU Law

Art. 207 TFEU stipulates that the common commercial policy of the EU is to be uniform. It constitutes an exclusive competence of the Union so that national legislators are no longer empowered to legislate unless the EU has authorized them to do so through a specific act. Measures under the common commercial policy, such as the EC Dual-use Regulation, are based on Art. 207 TFEU. Embargo regulations, on the other hand, are so-called restrictive measures, which are based on Art. 215 TFEU

The Export Control Law in the EU Member States has gradually been dispelled as a result of the advancing European integration. Codifications exist for example in Germany through the Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG), the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV) and the War Weapons Control Act (KrWaffKontrG). In view of the division of powers outlined, the national legislature is largely concerned with provisions which give the Member States the power to impose trade restrictions on the basis of overriding national interests (see Art. 346 and 347 TFEU). In particular, the law of trade in of arms and war weapons remains the competence of the Member States.

U.S. Law

Within the U.S., the statutory authorities for most of the U.S. Economic Sanctions Regulations are the Trading with the Enemy Act (TWEA), the International Emergency Economic Powers Act (IEEPA) and the United Nations Participation Act (UNPA). Many U.S. Economic Sanctions exist only under executive orders and do not yet have associated regulations. They are codified in 31 C.F.R. Chapter V. U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) is the primary regulatory authority for U.S. Economic Sanctions.
Defense trade controls are enumerated under the Arms Export Control Act (AECA) and implemented pursuant to the International Traffic in Arms Regulations (ITAR), codified in 22 C.F.R. Chapter I Subchapter M.
The Export Administration Regulations (EAR) virtually regulate all items not regulated by the ITAR. These regulations are not, as is often mistakenly alleged, limited to dual-use goods, although dual-use goods are without doubt a special focus of the regulations. They are codified in 15 C.F.R. Chapter VII Parts 730 - 774. The EAR are administered by the U.S. Department of Commerce's Bureau of Industry and Security (BIS).

Links


Administrative Regulations

The key points in brief:

  • Administrative regulations obtain implementing rules and guidelines for a uniform application of law
  • Administrative regulations are bound to acts of the legislative power and the Constitution
  • Without administrative regulations an application of law within the principle of equality is not possible

Explanations:

While self-executing EU regulations and national laws are directly binding for the national administration, the national and EU executive powers have enacted numerous supplementary administrative regulations in order to obtain implementing rules and guidelines for a uniform application.
We will not indulge in the legal distinction between acts of the legislative power on the one hand and administrative regulations of the executive power on the other (e.g. U.S. Executive Orders of the President need a statutory authority). However, it should be noted that acts of the legislative power are bound to the Constitution and that administrative regulations are bound to acts of the legislative power and the Constitution.
Administrative regulations are therefore to be measured by higher-ranking law, but at the same time it must be stated that without them an application of law within the principle of equality is not possible, especially in a diverse jurisdiction such as the EU.

EU Guidelines

The EU Political and Security Committee (PSC) has agreed in 2004 on some basic principles on the use of sanctions, their implementation and how to measure and control their impact. These basic principles are included in the guidelines on the implementation and evaluation of restrictive measures reviewed most recently 2012.

In 1998 the Council of the EU adopted the European Union Code of Conduct on Arms Exports which sets up eight criteria for the export of conventional arms, establishes a notification and consultation mechanism for denials and includes a transparency procedure through the publication of the EU annual reports on arms exports.

Links: