Guidance

Compliance checks and enforcement of export controls on strategic goods and technology

The types of records exporters should keep, how compliance is enforced, and why licences may be suspended or revoked.

Overview

There are strict controls on the export of ‘strategic’ goods and technology from the UK. This includes military equipment and ‘dual-use’ items that can be used for both civil and military purposes.

The Export Control Organisation (ECO) is responsible for licensing exports of goods that are included in the UK Strategic Export Control Lists. The ECO’s mission is to promote global security through strategic export controls and facilitate responsible exports.

The ECO monitors and enforces exporters’ compliance with export controls. This work is a key aspect of making sure that export controls are effective.

This guide explains why the ECO Compliance Inspectors Team visit and audit exporters to check that they have the right export licence and are complying with the terms of those licences. It also details the types of records that exporters should keep and the record-keeping policy they should set up. It explains why an Open General Export Licence (OGEL) may be suspended or revoked, and sets out details of the warning procedures that the ECO follows before a decision is made to revoke an OGEL.

The role of the ECO and exporters’ responsibilities

All exporters should be aware that exporting controlled items without the proper licence is a criminal offence.

The role of the ECO Compliance Unit

The ECO Compliance Unit is responsible for undertaking company audits to check that exporters are complying with the terms of their export licences. They are particularly concerned with the use of OGELs and Open Individual Export Licences (OIELs).

The main reasons for making a compliance audit are to:

  • ensure that exporters have obtained the correct licences
  • inspect export records to make sure that licences are being properly used
  • check that exporters have proper systems in place and comply with the terms of their licence
  • build relationships with exporters and get feedback from them

For help with complying with export controls, you can download the ECO Compliance Code of Practice.

Exporters’ responsibilities

Effective export control is very much a two-way process. The ECO Service and Performance Code sets out the government’s commitments to exporters and what exporters are expected to do. This includes:

  • making sure their goods comply fully with legal requirements and have the right licences
  • keeping up to date with changes to legislation or the terms of licences
  • putting in place the correct record keeping systems and training staff

For more information on this topic, access our guide about the Export Control Organisation: an overview.

Learn more about the Compliance Audit process

To understand more about what you should expect from an ECO Compliance Audit, you can watch a video explaining about export control open licence audits.

Keep up to date and informed

To keep informed about export control announcements about amendments to Open General Licences, changes to legislation, or about updates to guidance material, then you should subscribe to the ECO’s Notices to Exporters.

The role of HM Revenue & Customs and the Crown Prosecution Service

HM Revenue & Customs (HMRC) and the Crown Prosectuion Service (CPS) are responsible for investigating and prosecuting exporters who don’t comply with export control legislation.

Export Control Prosecutions

The risks of exporting without a licence are highlighted in a number of successful prosecutions of companies and individuals. Details of export control prosecutions are published on the Notices to Exporters blog.

Record-keeping and compliance

If you export controlled goods, you have various responsibilities under the conditions of your licence. These include keeping appropriate records.

What records to keep

You must keep adequate records of all your controlled export activities. Your records must be sufficient to show a logical and traceable audit trail of each transaction you make under your export licence. Details that your transaction records must show include:

  • the name and address - including the destination country - of the individual or organisation receiving the exported technology, and details of any known end-user
  • a description of the items exported
  • the export date or dates
  • the export licence used
  • any other information that your licence requires you to keep such as Ministry of Defence approvals

It is also important to keep a proper record of the individuals in your organisation who are responsible for different aspects of export control and licensing compliance. You should update your records whenever there is a change of personnel, or when someone’s duties are delegated.

Record-keeping procedure

To make sure your record keeping system works well, it is good practice to develop a record-keeping policy. This should cover:

  • when you update your records
  • how you keep your records
  • where you maintain and store your records

You should always be able to say what information you have available and how it can be accessed.

You must keep your controlled export records available for inspection for at least the period of time specified on your licence. When the ECO makes a compliance visit to your business, they will want to check your export records to ensure you are using your licence correctly.

Find out more

The overarching record-keeping requirements are listed in Articles 29 and 30 of the Export Control Order 2008.

Compliance visits: an overview

The ECO needs to be sure that an export licence user:

  • has proper systems and procedures to use open licences
  • is familiar with the export control legislation that applies to their business and their individual circumstances
  • is keeping up to date with changes and developments in the legislation and terms of their licences

The ECO makes compliance audits to exporters to make sure they are complying with the law. They have produced a guidance manual for exporters that explains:

  • why they make compliance audits
  • what happens before, during and after an audit
  • some of the penalties that an exporter might face if they are not complying with the legislation

It also highlights some specific issues regarding OGELs.

The guidance helps exporters to understand the process and make sure they are fully prepared so that both sides get the most out of the visit. You can download guidance on compliance visits.

ECO Compliance Code of Practice

There are strict controls on exporting certain items from the UK. Many of these - such as items for military use - are included in the UK Strategic Export Control Lists.

Controlled goods and technologies must have the correct export licence to be exported legally. The ECO monitors exporters to make sure they have the proper licences and are complying with the terms of the licences.

The ECO Compliance Code of Practice helps exporters to be aware of, understand and comply with the law relating to strategic export controls. The code was drawn up in close consultation with industry and is based on existing best practice already followed by exporters. The emphasis is on practical and relevant measures that simplify licensing procedures and comply with the law.

The code describes how you can:

  • gain a firm commitment to compliance from you and your staff
  • identify personnel responsible for export control issues
  • provide information and training to all staff involved with export matters
  • put in place internal compliance procedures
  • train staff to recognise and report suspicious orders
  • implement effective record keeping and internal audit procedures
  • integrate export control compliance procedures with existing quality management practices

As well as giving practical guidance, the code includes:

  • case studies
  • an export control compliance checklist
  • annexes containing further useful information

When an Open General Export Licence can be suspended or revoked

Most businesses take export regulations seriously and comply with export controls.

Exporters who don’t comply with export control legislation - or with the terms of their general or individual licences - can face criminal prosecution. They also risk having their licences suspended or revoked, either as an alternative to, or as well as, prosecution. This power is conferred by the Secretary of State for BIS.

The most common situation when an exporter’s OGEL might be suspended or revoked is where:

  • there have been minor infringements of the legislation or licence requirements
  • the exporter hasn’t put matters right within a reasonable period

In these circumstances, the ECO gives the exporter warning that their licence will be suspended or revoked if they don’t take steps to comply with export controls by a certain date.

There are situations when it would not be appropriate for the ECO to follow the warning procedures. For example, there might be little or no warning that a licence will be revoked if an exporter:

  • is being investigated or prosecuted for a possible criminal offence
  • has been found guilty of an offence under export control legislation

In these cases when speedier action is required, the Secretary of State has more general powers to suspend or revoke licences by following other procedures.

If an exporter’s OGEL is suspended or revoked, they can still export by applying for a Standard Individual Export Licence (SIEL). However, they need to be aware that:

  • an end-user undertaking or government purchase order is needed for each licence
  • processing the application may take around 20 working days, which will need to be factored into the timing of the export

Suspending or revoking export licences for non-compliance

Sometimes exporters are slow to put right administrative errors that have been identified during an ECO compliance audit. This has meant that the ECO Compliance Team makes a number of audits before the business concerned is complying fully with export control legislation.

The ECO has put in place a formal warning procedure for this type of situation. If during the course of an audit the ECO finds an exporter is not complying with the law - or with the terms of their licence - they will give them guidance on what they need to improve.

After the visit, they will send a warning letter setting out the steps the business needs to take to comply with export controls. This will specify a timescale in which the improvements should be made.

If, by the end of the specified period, no improvement has been made, the ECO may either:

  • suspend or revoke the exporter’s OIELs
  • suspend or revoke the exporter’s ability to use one or more OGELs

However, suspending a licence doesn’t necessarily mean that no other action will be taken.

When warning procedures are applied by the ECO

If the ECO discovers during a compliance audit that an exporter isn’t complying with export controls, they will put in place formal warning procedures. If the situation hasn’t improved by the next audit, the exporter’s licences might be suspended or revoked.

The main reason exporters are found not to comply with export legislation is because their paperwork and records are missing or incorrect. This means they can’t demonstrate that they are complying with all the terms and conditions of their licences - or with the general requirements of the law.

Record-keeping requirements

Export control legislation requires exporters to keep certain records of the controlled goods and technology they export. They must keep the following information:

  • name and address - including the destination country - of the individual or organisation receiving the export, and details of any known end-user
  • description of the goods
  • export date or dates
  • quantity
  • name and address of the exporter
  • name and address of the consignee
  • any other information that their licence requires them to keep

Examples of non-compliance

Examples of non-compliance that could lead to an OGEL being suspended include:

  • missing undertakings
  • missing paperwork showing a link to a government - if this is required
  • no Ministry of Defence (MOD) Form 680 approval where it is specifically required - see our guide on MOD F680 applications
  • not referencing the licence on paperwork
  • not keeping adequate records of exports - particularly in relation to electronic transfers

However, this list is not exhaustive.

If an exporter’s OGEL is suspended, they can still apply for SIELs so that they can carry on their business. They will need to submit a valid end-user undertaking with each application. They won’t be able to use their OGEL again until the licence suspension period is over. The suspension period only ends when the exporter fulfils the requirements that the ECO set out in their warning letter.

Stages of the ECO warning procedure

During the course of a compliance audit, the ECO Compliance Team may discover a minor breach of export control legislation. The ECO will put a formal warning procedure in place to allow the exporter time to put matters right.

The key stages of the compliance check and warning procedure are:

  1. The ECO undertakes a compliance audit and discovers minor non-compliance.
  2. A warning letter is sent to the exporter. This sets out what they need to do to comply with export controls and when they must do this by. The compliance officer decides on the timescale after discussing this with the exporter - either during the audit or shortly after. All exporters who do not fully comply with export controls are sent this warning letter.
  3. A further audit is arranged for the date agreed in the warning letter. If the compliance officer finds that the exporter now complies fully with the controls, no further action is taken.
  4. If the exporter hasn’t put in place measures to make sure they comply with the controls, the ECO sends them a letter suspending the use of their OGEL for a certain period.
  5. Before the end of the suspension period another audit takes place. If the exporter now complies fully with the controls, the licence suspension period ends. Otherwise, the licence may be suspended for a further period. The ECO sends another warning letter setting out what needs to be done and arranging another compliance visit.
  6. If there is no improvement at the end of the further suspension period, the exporter may be notified that their OGEL will be revoked.

There is a similar warning and suspension procedure for Open Individual Export Licences (OIELs).

Breaches of export control legislation

As an exporter, you may discover that you have exported goods or transferred controlled technology without an appropriate export licence in place. It is also possible that an ECO Compliance Inspector will identify an irregularity during a compliance audit.

If this happens, it is very important to report the irregularity to HMRC as soon as possible, as they are responsible for the enforcement of strategic export controls. If the irregularity was found on an ECO Compliance Audit, the Compliance Inspector will have informed HMRC and you are strongly advised to do the same.

You should write to HMRC at:

HM Revenue & Customs
Customs Enforcement & International Division Excise Customs Stamps & Money 3E/10 100 Parliament Street
London
SW1A 2BQ

You should provide:

  • details of the export - including dates
  • any relevant documents - such as export documentation and commercial invoices
  • details of how the breach was discovered, why it occured and what steps you have put in place to ensure it does not happen again

HMRC will consider the matter and contact you directly, either for more information or to let you know of their decision.

Report suspicious customs activity

You should also contact HMRC if you have seen, or if you are aware of, any suspicious export or import of goods such as military items. You can call the free confidential HMRC hotline on 0800 59 5000.

Further information

BIS ECO Helpline

020 7215 4594 or email eco.help@bis.gsi.gov.uk

Subscribe to the Export Control Organisation’s Notices to Exporters

Access OGEL Checker and Goods Checker on the ECO Checker Tools website

Download the ECO compliance visit guidance (PDF, 267K)

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