Aerospace and defence sector: international trade regulations
The regulations, charges and restrictions on importing or exporting military goods and how to apply for the correct licences.
All exports of military goods from the UK to any destination (including the EU) require an export licence issued by the Department for Business, Innovation & Skills (BIS). Regulations, charges or other restrictions may apply to aerospace and defence exports as they leave the UK and when they arrive at their destination country.
Find commodity codes and other measures applying to imports and exports by accessing the free online UK Trade Tariff tool.
Export regulations in the aerospace and defence sector
Many countries in the EU and throughout the world have specific legislation covering the import of defence and aerospace goods. It’s important to research both sides of the transaction.
Where UK companies have operations outside the UK local laws apply as well. So if your UK defence company operates a manufacturing plant in the US, its exports will be subject to US border controls.
For more information, see exporting your goods from the EU to a third country and dispatching your goods within the EU.
Dangerous goods must be transported in line with regulations - see moving your goods and moving dangerous goods.
Run by HMRC (HM Revenue & Customs), the Authorised Economic Operator (AEO) scheme allows registered companies to take advantage of the simplified customs procedures that relate to the security and safety of their goods in transit. Read the guide on authorised economic operators.
The UK-US Defence Trade Co-operation Treaty, which is aimed at improving the support which UK and US industry can provide jointly to their armed forces operating in Iraq, Afghanistan and elsewhere; is now in force in both the US and UK. Read more about the treaty in the guide about exporting military goods to the United States.
Restrictions and charges
First, you need to classify your goods. Use of standardised classification codes makes it easier to check if any restrictions or charges apply. You can use the Integrated Tariff of the UK to classify your goods.
Export licences for military and dual-use goods
Military and certain dual-use goods (ie items not specifically designed for military purposes but that could be used as such) need an export or trade licence to leave the UK. The licensing process is managed by the Export Control Organisation.
The UK Military List
The UK Military List details all licensed military items. You can use it to check if your goods need a licence. You should also consult the Consolidated UK Export Control Lists, which incorporate this Military List and the UK and EU dual-use lists. See: introduction to the UK Strategic Export Control Lists.
Dual-use and end-use goods
Items that haven’t been specifically designed for a military purpose but that could be used for such a purpose because of the high specification are classed as ‘dual-use’ and may require a licence.
Any goods involved in handling, operation, maintenance, storage, detection, identification or the spread of nuclear, biological or chemical weapons also need a licence, as do goods that are not included in the Strategic Export Control List, but that may be used in a weapons-of-mass-destruction context.
Some exports not on the Military List may need an export licence under the military end-use control. This applies if the exporter has been informed that the goods are to be used for a military purpose in a country under an arms embargo, or informed that they’re to be used for illegal weapons.
You need to be aware of both the UK controls and the international trade sanctions or arms embargoes against particular countries or regions. See current arms embargoes and other restrictions.
As a result of the Export Control Act the trading of military goods abroad is also a licensable activity. The ECO also licenses the trafficking and brokering of military goods between destinations. This involves transactions between two overseas countries where the deal is brokered or conducted in the UK.
Trade controls apply to all activities undertaken from within the UK and in certain circumstances to activities undertaken by UK persons while overseas. The legislation also controls activities of the transport sector concerning transport of military items.
Trade controls also apply to the brokering - which can include warehousing and shipping - of dual-use goods that could be used in connection with weapons of mass destruction. Whistle-blowing measures also apply.
See the guide on trafficking and brokering (trade controls).
Ministry of Defence (MOD) F680 clearance
The MOD F680 is a pre-clearance check that is required if an exporter plans to sell, demonstrate or promote or export certain equipment, goods or classified information for export promotion purposes. The F680 process gives an indication but not a guarantee that an export licence will subsequently be issued. You must obtain F680 clearance in order to use certain licences. For more information, see MOD F680 applications.
Traders must allow enough time to apply and receive a licence before exporting goods. While the process can sometimes be completed in a few weeks, BIS will need longer to issue some licences.
Types of export licence
There are currently seven types of licence issued by ECO. The most common licences are:
- Open General Export Licence (OGEL) - these licences are specifically designed to ease the licensing burden on companies and should be considered if possible, if all terms and conditions can be met. They permit the export of specified controlled goods that have been assessed as lower strategic risk and to lower risk destinations. There are currently over 40 different types of OGELs available which licence exports of either military or dual-use goods. There are also EU equivalents of OGELs called European Union General Export Authorisations (EU GEAs) which licenses certain dual-use goods. Exporters need to register for most OGELs via the ECO’s SPIRE export licensing database. All OGEL holders should expect periodic ECO Compliance Audits. While OGELs stay in force until they’re revoked, their provisions can vary at any time, so exporters must stay up to date with changes via the ECO’s Notices to Exporters email alert service.
- Standard Individual Export Licence (SIEL) - allows export of a specific quantity of a certain good to a named importer. If you are not permitted to use an OGEL due to the nature of the goods or export destination (for instance, because you intend to export a controlled item to a sanctioned country), then you need to apply for an SIEL.
- Open Individual Export Licence (OIEL) - issued for a specific exporter and allows different goods to be sent to various destinations. This is a concessionary licence. You need a track record with ECO before being issued with an OIEL.
Before either registering for an OGEL or when applying for a SIEL, OIEL or other type of export licence, you should be careful to avoid errors in your application, since this could cause delays. For instance you should:
- understand what is licensable
- understand how to correctly rate your goods (ie check the goods entry in the UK Strategic Export Control List)
- ensure that you fully understand the requirements, terms and conditions of all licences
Export licence applications can be made via SPIRE, which is the ECO’s electronic system for processing licence applications.
Research your export destination in the aerospace and defence sector
You should thoroughly research your export destination country when planning to export.
There are a number of issues that you ought to consider. As a starting point you may wish to seek advice from UK Trade & Investment (UKTI). Find your local international trade team on the UKTI website.
There are also various ways that you can research a potential export destination. These include trade associations.
You should also consider product safety and other technical standards in your export market. Your goods may need to be adapted to comply with these. Rules in your export market may be less or more strict than in the UK.
You should be aware of any sanctions and embargoes in force on your potential export destination. For information see the guide on sanctions, embargoes and restrictions and for more specific detail see the guide on current arms embargoes and other restrictions.
You can ask for information about your export destination country from a range of organisations, including:
- your local UKTI trade team
- your UKTI team within the commercial section of the UK embassy in your destination country
- aerospace and defence sector trade associations
- the Chambers of Commerce in the UK and in your destination country
Tariffs and duties in the aerospace and defence sector
There is a range of import regulations that must be complied with by all businesses in this sector. These include the Tariff, VAT and duties, Intrastat and intellectual property.
Using the Integrated Tariff
A common customs tariff is applied across all EU countries on goods imported from outside the EU. Details of specific tariff duties and measures are contained in the Integrated Tariff of the United Kingdom.
The Tariff is used to determine the specific classification code of your goods and to find out:
- any licensing requirements that apply (although note the requirements to check the UK Strategic Export Control Lists if necessary)
- the rates of duty and import VAT that apply
- any additional charges, such as anti-dumping duties
- any available preferential duty rates
Find commodity codes and other measures applying to imports and exports by accessing the free online UK Trade Tariff tool.
Preferential rates of duty
The Generalised System of Preferences (GSP) allows products from a wide range of countries to be imported in the EU at a reduced or zero rate of duty.
The European Community (EC) has a number of other trade agreements with third (non-EU) countries, as a result of which goods may attract preferential rates of duty.
Intrastat is the method of collecting information and producing statistics on goods traded between EU member states. See the guide on Intrastat - reporting the value and volume of intra-EU trade. Intrastat is only applicable to VAT-registered traders.
If you are VAT registered and the goods you acquire from or supply to VAT registered businesses in other EU countries reach the Intrastat exemption threshold for the year, you must submit monthly supplementary declarations to HMRC. Intrastat thresholds are reviewed annually. The thresholds are £600,000 for arrivals and £250,000 for dispatches.
You should ensure that imported goods do not breach the intellectual rights of other businesses, eg watch out for counterfeit goods and design infringements. Infringing goods can be seized and destroyed by HMRC. You can ask HMRC to check for imported counterfeit versions of your goods. For more information about how to protect your products through trademarks, patents or other options, see the Intellectual Property Office website.
Import regulations in the aerospace and defence sector
Import restrictions can be product-specific or trade-specific. Many products are subject to product-specific standards and need to be supported by applicable certificates, product-specific licences and documentation.
Quite separately, quantitative restrictions or limitations and anti-dumping duties may apply to certain imported commodities. For more information, see anti-dumping duty to protect EU businesses against cheap imports.
Run by HMRC, the authorised economic operators scheme allows registered companies to take advantage of the simplified customs procedures that relate to the security and safety of their goods in transit.
Import licences and certificates
As the EU is a customs union you can buy some goods, except firearms and ammunition, from other member countries without restrictions, although VAT and excise duty can still apply. However, most member states operate their own import controls on aerospace and defence goods and it’s likely your import may be subject to regulation. You can also see more on VAT on goods from EU countries on imports and purchases from abroad: paying and reclaiming VAT.
If you import from outside the EU you may have to comply with import licensing requirements for firearms and ammunition and with common customs tariffs that apply across the EU for all goods. Read about import controls.
Importers of firearms and ammunition need to apply to the BIS import licensing branch for a licence to import. Import licences are only issued to those with domestic authority to possess. Read about the goods that need BIS import licences on the BIS website.
Co-ordinating Committee for Multilateral Export Controls (CoCom) countries include most of Europe, the US and Japan. If you import controlled goods from a CoCom country into the UK, you may need an import licence and an International Import Certificate (IIC). IICs cannot be used as stand-ins for import licences.
If you’re asked to do so by the licensing authority of one of these countries, you must apply for an IIC. The IIC gives an undertaking by the importer to import the goods into the destination country specified, without a diversion or transhipment, and not to re-export the goods without an export licence from the licensing authority in that country. IICs are available from certain UK Chambers of Commerce. Find information about IICs at the Yorkshire Chamber of Commerce website.
Banned and controlled goods
It is forbidden to import anti-personnel mines and instruments of torture or execution. Some weapons are also forbidden, including:
- flick knives
- martial arts weapons, eg ‘death stars’ and ‘swordsticks’
- knives with a concealed blade or sharp point, eg belt-buckle blades
- high-voltage electric ‘stun guns’
- pepper sprays and CS gas (‘tear gas’) canisters
- high-powered air rifles
- cluster munitions
Importing these weapons can mean a prison sentence.
The import of hand guns is strictly regulated by BIS. Import licensing requirements for these weapons are strict.
Duty reliefs for imports of aerospace and defence products
Processing under Customs Control (PCC) was set up to encourage processing in the EU by allowing certain raw materials or components to be imported under duty-suspension arrangements. You must be authorised to use PCC, be able to show customs officers your contract with the Ministry of Defence (MoD) and supply details of the processing manufacturer.
Other customs procedures with economic benefits include inward processing (IP), outward processing relief, customs warehousing, free zones, and types of temporary importation including ATA and CPD carnets. The schemes delay or suspend the payment of import duties. Under some relief schemes, such as IP, you can also avoid paying import VAT. Read about customs procedures with economic impact in the guide on export declarations and the National Export System.
The Certificate of Airworthiness scheme allows you to claim duty relief on parts imported with a certificate authorised by EU aviation authorities or third-country (non-EU) authorities. You can claim relief on:
- parts, components and other goods with the certificate falling within the Tariff chapters 25 to 97
- goods intended for re-export within a specified time
- some goods imported for use in authorised aircraft spare-parts depots
End-use relief provides relief from duty. To claim relief for military equipment you need to:
- obtain additional authorisation and a certificate issued by the MoD or equivalent EU member state
- be importing goods for use by or on behalf of an EU member state’s military forces
As a sub-contractor you must be authorised to use the reference number of the imported goods certificate.
ASD-STAN publishes standards for manufacturers and traders in the European aerospace industry. Read about standards in the sector on the AeroSpace Defence Security (ADS) website.
Dangerous goods must be transported in line with regulations - see moving dangerous goods.
Sources of help and support in the aerospace and defence sector
UKTI’s Defence & Security Organisation can provide specialist export advice and practical assistance.
Published: 7 August 2012
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