“Strategic trade controls” or “STC” (sometimes referred to as “export controls”) are collectively defined to mean the laws, regulations, special rules, restrictions, and administrative procedures, that govern trade and transactions involving items, businesses/entities//individuals, and countries for which there is the possibility the items involved will be used for WMD or conventional weapons-related purposes. Unlike other commodities which may be regulated by your country for environmental, health, or safety reasons, “strategic items” are regulated because their trade or transfer to foreign parties affects their governments’ core national interests and international security obligations. These include national security, preventing the dangerous proliferation of weapons of mass destruction (WMDs) and conventional weapons, and strategic foreign policy and economic interests.

Rationale for and Purpose of STC

STC can be tailored to reflect their states’ core national interests and international security obligations in the following areas:

• Supporting national and collective security goals: STC can help governments prevent the proliferation of WMDs and conventional weapons, promote counter-terrorism goals, prevent human rights violations and repression by foreign governments, and promote regional and international security and stability
• Meeting international security obligations: Strategic trade controls contribute to your country’s efforts to meet its international nonproliferation obligations, such as UN Security Council Resolution 1540, and treaty commitments, such as the Nuclear Non-proliferation Treaty (NPT), Chemical Weapons Convention (CWC), and the Arms Trade Treaty (ATT).
• Enhancing National Foreign Direct Investment (FDI) Profile: Domestic industry can benefit from STC and, in particular, enterprises that adopt STC internal compliance programs. Countries that possess STC consistent with international norms and best practices are more attractive to foreign suppliers and investors involved in producing strategic commodities. Possessing a comprehensive STC system can build confidence among foreign investors about the security and regulatory environment within your country. This can help enterprises gain access to higher-tech and higher-value goods and attract more FDI in those areas.
• Protecting Business Reputations and Access to Foreign Technology: STC promote general trade security and reduce the risk of legitimate trade being exploited by terrorists, criminals, and procurement networks of potential proliferators. STC protect domestic exporters and trade facilitators (brokers, shippers, freight forwarders, etc.) from being exploited by terrorists and proliferators without compromising legitimate trade in strategic items. Enterprises that are found to have been involved in proliferation cases can be black-listed by foreign governments and subsequently face substantial barriers in acquiring strategic goods thereafter.

The International Foundations of Strategic Trade Controls

Countries adopt STC systems not only to promote their national interests but also as part of their international obligations. Via treaties such as the Nuclear Nonproliferation Treaty (NPT), Chemical Weapons Convention (CWC), and Biological and Toxin Weapons Convention (BTWC), most countries in the world have committed themselves to preventing the proliferation of these dangerous weapons of mass destruction.Out of these treaties, only the CWC contains an explicit provision that requires its members to adopt STC on the trade of dangerous chemical weapons precursors. In 2004, though, the United Nations Security Council (UNSC) passed Resolution 1540 that obligated all countries in the world to adopt STC to help prevent terrorists from acquiring nuclear, biological, chemical weapons, and their means of delivery. The UN’s 1540 Committee has been active in reporting on the global implementation of the resolution’s obligations and provides resources to facilitate compliance.

In addition to the legal obligations that states have to prevent proliferation, a number of other multilateral organizations play a role in promoting the effective implementation of STC. The Wassenaar Arrangement (WA), Nuclear Suppliers Group (NSG), Australia Group (AG), and Missile Technology Control Regime (MTCR) have played an active role in creating control lists that represent a multilateral consensus on the strategic goods and technologies that should be subject to strategic trade controls. These multilateral export control regimes have also played a role in promoting international best practices for adopting effective STC and identifying emergent proliferation threats from new technologies. While these regimes have limited memberships, their control lists and many of their guidelines and best-practices are closely-followed and publically available. Additionally, the World Customs Organization has also become actively involved in promoting best practices on the implementation of STC in the customs realm.

Scope of Strategic Trade Controls

The scope of an STC system can be evaluated in terms of how broadly it seeks to control goods and technologies that have strategic implications and how comprehensively it seeks to control the various transactions associated with the international trade and transfer of strategic items. Many governments employ national control lists that are comprised of the strategic items designated by the Wassenaar Arrangement, Nuclear Suppliers Group, Australia Group, and Missile Technology Control Regime.

Modern strategic trade controls apply to more than just exports. Over the past decade, international best practices have evolved, and an increasing number of national governments now regulate a broader range of trade-related activities and transaction types. In response to criminals and proliferators growing more sophisticated in their attempts to illicitly acquire controlled items and technologies, governments have responded by expanding the scope of control over the set of activities associated with transactions involving controlled items. While initially those activities were expanded to involve other transportation related activities, the set of controlled activities now includes brokering and financing activities, technology transfers, and various forms of end-user supports.

The following types of activities can be subject to control depending upon the scope of control that your government’s STC system exercises:

Individuals or enterprises that engage in any of these activities as they relate to the strategic items controlled by governments may be subject their governments’ or other governments STC compliance obligations.

What are “Strategic” Items?

They are goods or technologies whose trade or transfer have national or international security implications. This category includes conventional weapons, chemical weapons, biological weapons, nuclear weapons, and their means of delivery, in addition to the materials, equipment, and knowledge that contribute to their development, production, maintenance, and/or use. Many of the materials, equipment, and knowledge associated with the creation of strategic items are dual-use in that they also have peaceful, commercial applications, creating challenges for governments in ensuring they are used for legitimate purposes.

Strategic items are inclusive of products, services, and technologies, which can include:

• Tangible items such as parts, equipment, components, and materials
• Intangible items such as technology, software, and information that can be transferred by electronic, oral, or visual means

List-based Controls

National governments seek to optimize legitimate trade in strategic items by utilizing a national control list(s) or NCL to specify those items that are subject to strategic trade control and/or licensing requirements. Some governments maintain multiple lists - with one list for dual-use items and another specifically dedicated to munitions-related items. In other countries with strategic trade controls, the national control list contains both dual-use and munitions-related items in one consolidated list. Regardless, most governments tend to update the national control list annually in order to account for technological developments. New items may be added and outdated items deleted from the control list. The most common changes to a control list involve updating the threshold of control of listed items (e.g. measuring sensitivity, performance, and other technical specifications). National governments usually designate a specific agency as the body responsible for maintaining and updating the national control list (usually the licensing authority).

Note: Your enterprise should seek to identify the list(s) of strategic goods and technologies in use in your country and the appropriate government licensing authority for transactions involving listed commodities.

Non-List-based Controls (“Catch-all” controls)

Even if the item is not found on the national control list, many governments require enterprises to seek a license when they “know, should know, or are informed by the authorities” that the item will contribute to nuclear, biological or chemical weapons programs, their means of delivery, or conventional military end-uses. These types of controls are commonly referred to as “catch-all controls” and are typically employed to prevent dangerous transactions with specific end-users or destinations designated by national governments. In short, catch-all controls provide a legal-regulatory basis for government to license non-listed items when there is reason to believe such items are intended for a WMD/military end-use or end-user. More and more countries are adopting catch-all controls in an effort to prevent strategic items from reaching destinations or end-users of proliferation concern.

Elements of an Effective Strategic Trade Control System

There are five key elements to strategic trade controls that work in concert with one another to efficiently manage the trade of strategic items. National laws and regulations provide the foundation of STC systems by determining which agencies have the authority to regulate strategic trade, what types of items and transactions are subject to control, how controls will be implemented, and what the punishments are for violations. A country’s national control list determines the specific strategic items and technologies that a government has designated as being subject to strategic trade control. The licensing system includes the set of authorities, policies, and procedures that are responsible for determining whether transactions subject to control should be approved or denied. The implementation and enforcement bodies, such as Customs, are the entities responsible for ensuring that industry complies with their STC obligations and are involved in the investigation and prosecution of violations. Finally, industry outreach comprises the set of activities that governments undertake to educate industry about its compliance obligations, receive feedback about the effects of policies or proposed reforms, and engage in information-sharing to promote best practices and avoid STC violations.