BOTTICELLI Project Enhancing Export Control Cooperation between Industry and Governments Sandro ZERO 1 Chantho CREZE on behalf of the project s Secretariat B O T T I C E L L I P R O J E C T Painting of Venus and Mars by Sandro Botticelli, showing Mars asleep while the satyrs transform Mars arms into toys. SUMMARY Exporters of dual-use goods and controlled technologies are considering common Export Control Principles as well as smart practices on governance and compliance management aimed at promoting dialogue and cooperation with governments and international institutions and at enhancing public acceptance and non-proliferation education. 1 ZERO Sandro, Tel: +33 1 34 96 08 4, cel. +33 6 03 68 54 20 E-mail address: info@botticelliproject.org
The initiative proposes Ten Export Control Principles to commit, a proposal to improve the actual Dual Use regulations and a smart security approach responding to the rapid development of new technologies and new challenges and to the real risk of diversion. It is a step toward the simplification and harmonization of export control international rules and practices in order to become more effective in terms of preventing illicit trafficking without distorting competition. BOTTICELLI Project is a worldwide association of members (industries and academia) respecting law and regulations and of supporting members (governments and institutions) aiming to: Confirm their contribution to international security by curbing proliferation of weapons of mass destruction (chemical, biological, nuclear) and their delivery systems (Aerospace, Information Technology, Transport and Finance). Support the efforts of the international community in the implementation of the UN Security Council Resolution 1540 Promote smart practices and standards commonly used by the most compliant sectors Facilitate access by customers and partner countries to dual-use goods, controlled technologies, and associated technical assistance and services Increase awareness among industries, academia and research communities to understand proliferation mechanisms and the ways to counter them Concentrate on real risks and illicit trafficking while facilitating positive and constructive commercial trade Improve cooperation and Outreach on export control Enhance legal and regulatory frameworks and the capacity of authorities to implement a common minimum baseline for all regulatory regimes. The BOTTICELLI Project is Chaired by an Export Control Expert inside a sound organization composed by a Secretariat and the following concerned sectors: Chemistry, Biology, Nuclear, Aerospace, IT, Financial and Transport. The success of the project lays on the commitment of all participants and the support of the Governments, the UN Office for Disarmament Affaires (UNODA) and the 1540 Committee. BOTTICELLI Project s actual participants are: AIRBUS, AIR LIQUIDE, AREVA, BAFA (German government), BIOSAFETY, BOEING, BUSINESSEUROPE, CISTEC Japan, Digital Europe, EDF ENERGY, ERICSSON, ESSENSCIA Chemical, FIATA, GENERAL ELECTRIC, HITACHI, ICTS Georgia, Joint Research Center of the European Commission, KOSTI, MAXELL, PHILIPS, PNNL, ROLLS ROYCE, SAFRAN, SIEMENS, SBDU (French government), SIEPS, SIPRI, THALES, Universities of Insubria, Liège, London, Rome and Paris Sud, VELAN Chemical, WESTINGHOUSE, World Nuclear Association and others to come... Members will issue a reference industry export control guidelines and smart practices. Participants will commit on fundamental export control principles recalled in the Ten Principles. A reference Internal Compliance Program, a reference Self-Assessment and a roster of experts will be prepared. Participants will promote the initiative towards new members and conduct self-assessments and peer-reviews. The BOTTICELLI Project is a fundamental industry contribution to the Comprehensive Review of the 1540 Resolution and a contribution to the current UN and European Commission Outreach program including the organization of an Export Control Industry Day. BACKGROUND At the occasion of the 10 th anniversary of the 1540 UN resolution, on the November 2014 meeting in Frankfurt, the 1540 Committee, the German and the US Governments, UNODA and the European Commission have invited the Industry to take a greater role in strengthening the application of export controls and making an active contribution to the non-proliferation regime. The BOTTICELLI Project was therefore created to respond to this invitation in support to the 1540 efforts. The project confirms the industry s involvement in terms of prevention of illicit trafficking and non-proliferation of weapons of mass destruction.
This industrial initiative mainly aims at establishing Ten Export Control Principles and Export Control Guidelines common to exporters of dual-use products and to support industry s involvement in the 1540 Resolution in conformity with laws and regulations. With this project the industry exporter of Dual Use goods will explicitly commit themselves to comply with common principles acceptable worldwide. The initiative is in support to governments and regulators and is a step toward a common minimum baseline for all regulatory regimes that simplify compliance of international rules and best practices, in order create a real Export Control Culture to become more effective in term of prevention of illicit trafficking without distortion of the competition. Indeed, on the first hand, common guidelines and best practices will facilitate the fight against proliferation thanks to efficient, common, clear and relevant controls. On the other hand, a better adequacy of the regulation with business affairs will ensure markets long-term viability. BOTTICELLI Project is definitely aimed to enhance cooperation and dialogue between institutions, governments and industry. This is of paramount importance if we want collectively succeed. The initiative is promoted by the industry, exporter of strategic products and is addressed to national administrations, international institutions as well as customers and a larger public. The principles entail many advantages: - In a context of instability and international tensions, the proliferation risk of weapons of mass destruction could impede the harmonious development of sensitive civilian applications. Efficient, clean and relevant export control will reduce proliferation risk, while allowing useful civilian application of dual-use technologies - The scope is specifically focused on Export Control of Dual Use Items. The number of supporting suppliers includes major international industries working on Dual Use products, their partners and supply chain. Therefore, it guarantees that all exporters of strategic goods and technology commit themselves to enhance global security through strict compliance with the same principles. - While recalling common principles on which all the exporters comply, the initiative also ensures the authorities and the customers (potential or confirmed) that projects will be achieved on time and in compliance with national and international export rules. - By improving Export Control Culture across industries, governments will be able to better focus their time and resources on exports that pose the greatest risks. - To be a reference in terms of non-proliferation, we need a non-proliferation legal system transparent and solid which could be source of inspiration for the rest of the world and not an element of distortion of the level playing field. - In addition, the initiative seeks to enhance public confidence towards industry by demonstrating the willingness of industries to create and implement high standards of transparency, integrity, ethical behavior and social responsibility in conformity with laws and regulations. - It is the goal of the BOTTICELLI Project to become a common industry reference for any Internal Compliance Program and Outreach Program.
Botticelli Project Program The BOTTICELLI Project Program enumerates a number of guidelines aiming at enhancing a better Export Control system among exporters of dual-use items in order to reduce disparities between countries and to harmonize best practices on the international level in terms of Export Control towards actual and new challenges. The program falls into three sections. The first section The Ten Principles of Conduct presents the commitment of the industry to the fundamental principles of the Export Control. These principles constitute the basic culture that any mature and responsible industry must guarantee for the Export Control Compliance. Beyond the law and regulation, these principles are part of the internal industry policies and conform to the 1540 Resolution articles. The second section Comply with the current system presents the operational best practice that the industry implements today in order to comply with the existing regulations and supports the necessary cooperation between governments, regulators, international institutions and industries. This cooperation in addition with practical and concrete proposals to improve the actual regulations respond to the needs of large international projects and to the modern organization of the supply chain. The regulation currently implemented is indeed more adapted to punctual bilateral exports of tangible goods than worldwide tangible and intangible supplies for large projects over a longer period of time. The third section Towards an effective system proposes an export control organization ready to face the new challenges and based upon an effective product/country risk of proliferation in the world (risk base approach model). This risk base approach model will be more adapted to the current industrial practice and new challenges and would prove its effectiveness in the fight against proliferation. The export control system, which is seen today more like a constraint by the industry, would thus bring an effective tool against the proliferation of arms of mass destruction and a protection for the industry without interfering with the day by day commerce. The wording Export Monitoring instead Export Control would better reflect the spirit and the cooperation between the industry and the regulators with this new approach.
I. The Ten Principles of Conduct This section presents the commitment of the industry to the fundamental Principles of the Export Control. These principles are aspirational for the international community, governments and industry to improve export control compliance. Beyond the law and regulations, these principles underpin the industry s internal compliance program. The Ten Principles of Conduct I. Refrain from providing any form of support to any individual or entity that attempts, contrary to applicable export control laws, to develop, acquire, manufacture, possess, transport, transfer or use nuclear, chemical or biological weapons and their means of delivery. II. Create and enforce an effective Internal Compliance Program (ICP) that includes a commitment from the highest level of Member management, procedures, dedicated export control officers (ECO), and training, as well as self-assessments and/or audits and extend the foregoing to each Member s suppliers, sub-contractors and to the supply chain. III. Develop effective protection measures and provide funds and services to account and secure sensitive items in production, use, storage, transport, transit, trans-shipment, re-export and control, as well as establishing end-user controls. IV. Support the establishment of a sound structure of the B O T T I C E L L I Project composed of a Secretariat and the following Sectors: Aerospace, Chemical, Biology, Nuclear, Information technology, Transport and Finance; aimed at recommending appropriate effective procedures and guidelines consistent with applicable export control laws. V. Interpret this list of Principles consistently with the rights and obligations arising under applicable export control laws. VI. Establish a list of products, material, technology, services, training and technical assistance that are subject to applicable export control laws and to yearly pursue the update of such lists. VII. Offer assistance as appropriate in response to specific requests to other exporters in order to implement the provisions of these Principles. VIII. Promote the universal adoption and full implementation of these Principles. IX. Promote dialogue and cooperation between industry, academia, research centers, national and international institutions and governments. X. Monitor closely the implementation of these Principles through regular peer reviews and by other agreed upon means.
II. Comply with the current system and support the necessary cooperation and dialogue between regulators, international institutions and Industries to respond to the actual needs of large international projects and to the modern organization of the supply chain. The regulation currently implemented is indeed more adapted to punctual bilateral exports of tangible goods than worldwide tangible and intangible supplies for large projects over a longer period of time. This cooperation in addition with practical and concrete proposals to improve the actual regulations respond to the needs of large international projects and to the modern organization of the supply chain. Generally the regulation is indeed more adapted to punctual bilateral exports of tangible goods than worldwide tangible and intangible supplies for large projects over a longer period of time. This section presents the operational practice of the industry in order to comply with the existing regulations 1) Promoting general licenses for dual-use goods General licenses allow movement of dual-use goods in certain regions. Thus, they rationalize the regulation related to export control and reinforce the stability of the markets. 2) Free movement between subsidiaries of a same company Subsidiaries of a firm willing to exchange dual-use goods and technology have to request an individual license. This provision is not adapted anymore either to the business world (internationalization of teams), or to new technologies (intangible exchanges of technology, through commonly shared servers for instance). With a same concern for efficiency and rationality of the regulation, an exemption of intra-company license would be smart and beneficial for companies having in place a qualified ICP. 3) Technology exports by universities or research centers A recurring question addresses whether it is necessary to control technology exports by universities or research centers. The latter usually claim that it is their duty to make their knowledge public and thus they consider not to be submitted to the Export Control rules. On the contrary, industrialists answer that technology exports have to be treated equally by Universities as well by Industries if related to Dual Use items. It is the nature of dual-use product, to which technology refers, which should be taken into consideration and not the legal status of the exporter. This differentiation would be damaging for the industry and would not have any justification in terms of non-proliferation. A solution would be to determine a technology threshold above which a license would be required..
4) Ensuring a control of the Intangible Technology by an ICP and auditable Authorized Economic Operator of companies Technology is usually exported by intangible means through computers, servers, share-points, clouds Industry can only export dual use technology if a valid export license is previously delivered by their national authority. This license will not be submitted to the customs (as it is also the case in the EU for tangible products) because of the intangible nature of the export. As a result, the exporter will be himself in charge to booking the license (or to keep track of the exportation) to keep his exports reporting updated and conform to the export license. As this practice does not have any legal explicit obligation, the Internal Compliance Program (ICP) is the only response and the only mean to inform exporters of a company how to carry out a control over intangible exports and to make sure that these exports are indeed authorized by an export license. The ICP, as the Authorized Economic Operator (AEO) will be auditable, but they should constitute a real benefit in terms of export facilitation. 5) Human Rights approach in the Dual-use items regulation? Do Human Rights should not be considered as a criterion in export control, because the topic should be tackled within an ad hoc and more appropriate framework. We should think about an efficient export control, which could practically be applied. The Human Security concept is relatively vague and complex. It differs from the priority goal of export control: the non-proliferation of weapons of mass destruction. Integrating such a new concept would increase the administrative burden, which is already difficult to implement and the concept of Human rights will not be served as needed. 6) Cooperation between Industry and Government in the implementation of a unique international regulation Industry view is essential in the implementation of measures related to export control by the Governments. Industry is indeed directly concerned by these rules and their adherence to the system is of paramount importance to ensure collective success. Moreover, exporters are the first ones on the ground, the first to identify deficiencies and they are in the best position to learn about the use of their own products. Among others, an active and dynamic dialogue between Industry and Government would allow a faster reaction, update and adaptation of lists of dual-use products in order to face a fast evolvement of technology. If the industry could easily report its needs to the Government and to the international institutions, it would be possible to optimize the transfer of information and worldwide effectiveness of the system. A good cooperation between Industry and Government in the definition of rules and dual-use products as well as a licensing transparency would be the evidence of a well-done work, for which the keyword would be cooperation. 7) International Advisory Committee for Industry (IACI) exporting DU items. In the absence of a real presence of industrialists in the committees and international DU regimes, such as intergovernmental groups representing the various regimes (NSG, WASSENAAR or 1540 Committee), it would be useful and beneficial to create a similar consulting group of enterprises. This Committee could spread the messages and the industrial vision of dual-use and it could give advices to governmental decision-making bodies. The actual existing body at the European level is the Dual Use Group of BusinessEurope the leading voice of European enterprises. BOTTICELLI Project is ready to take this responsibility.
8) License exemption (or export facilitation) to countries and entities being themselves exporters of DU items. Most of the time, exports are made between States that already possess knowledge and technology of the products that are exchanged (e.g NSG members). Reasons for exports (technology, documents ) between such States are purely contractual and economic and the control of these exports does not add anything to the non-proliferation goal. It delays and complexifies the licit export procedures, breeds a series of useless procedures, and is time, budgets and workforce consuming. Thus the control of the exportations that do constitute a risk of proliferation is deprived of means. On the other hand, the export of products and technologies to a State or entity that does not already possess them justifies a stricter control. 9) Mutual recognition of Export Control systems in the world In the absence of a unique international regulation and in the same spirit of administrative rationalization, regulation and simplification, a mutual recognition at the international level of the quality and effectiveness of the export control respective systems (national and interregional) would ensure dynamism of exchanges and would facilitate exports. This mutual recognition relies on trust (and EC outreach) between States and would be based on the robustness of their respective export control systems. To avoid duplicate export control procedures in two different countries and in the absence of a unique international regulation, it is necessary to lay down mutual recognitions between countries of the respective export control systems. Extraterritoriality of the national law should be avoides. 10) Facilitation for licensing of spare parts or license renewal. A significant part of exports concerns the supply of spare parts. If the first export of the component needed an export license, why do we need to repeat the licensing procedure in case of a justified replacement of the part? The industry s experience, certified by an AEO and an ICP, must enable the assessment of a real need by the client for the supply of a spare part. It would be beneficial to extend the duration of a license and/or to facilitate its renewal. 11) Implementation of symmetric practices Following the requirement of mutual recognition and ending asymmetric practices between countries would allow a level playing field and an easier implementation of mutual recognitions. 12) Introduction of de minimis for no sensitive items Nowadays, the DU regulation does not make any distinction between an exportation of a few tons of products (or controlled materials) and very small volumes or quantities traces. Introducing a de minimis rule could facilitate exchanges while maintaining an effective control. 13) Catch-All clause, denial A catch-all clause should be used to control products not explicitly listed in the regulations and the catch-all decision should be communicated to an international body (UN 1540 Committee) in charge for communicating the catch all decisions worldwide. This communication would alert other countries of the new risk. The same happens for a license denial. In order to fix this dysfunction, it would be useful to force the exporter to report every catch-all or denial to an international body (UN 1540 Committee).
III. Towards an effective system This section proposes an export control organization ready to face the new challenges and based upon an effective product/country risk of proliferation in the world (risk approach model) and a reference international regulation able to prevent any interpretation of the regulation and any distortion of the competition. This model will be more adapted to the current industrial practice and new challenges and would prove its effectiveness in the fight against proliferation. The export control system, which is seen today more like a constraint by the industry, would thus bring an effective tool against the proliferation of arms of mass destruction and a protection for the industry without interfering with the day by day commerce. 1) Risk-based control The concept of «risk-based approach»is linked to the one of «smart security approach». The current regulation applies to all the products listed in the regulations, without any distinction related to level of the risk of proliferation. Moreover, the regulations do not take into consideration the State-user, the final beneficiary of the export, when assessing the level of risk of the export of a given product. As a result, an export of a dual-use product will be processed administratively in the same way, the product being transferred within a same region (such as the EU) or exported outside the region or even in a sensitive country. Then, the current regulation, considering that all products of the DU list and all beneficiary countries have the same proliferation risk, unnecessarily increases the burden of the process for products and countries the least sensitive. Each industry should propose to governments a list of products with proliferation risk associated, and the governments to propose a list of sensitive countries. Hereafter is an example of scheme for a possible «risk-based»control specific for nuclear.
2) Necessity of a unique license for Large Projects Practice in France, inspired by European regulation 428/2009, limits the duration of individual licenses to two years and thus, to complete a large project, many export licenses have to be issued including the ones by the main contract holder, its subsidiaries and subcontractors. It leads to a significant competitive disadvantage compared to American competitors. Practice of the US confirms this: only a unique license is required for the whole scope and duration of a large project. It gives the US a significant advantage compared to the burden of European formalities, inside and outside the EU. Customers take today into account administrative burdens when choosing their supplier. Moreover in the case of a large project, the client-country may impose some local suppliers who would also be the beneficiaries of the exports. To insure a level playing field and avoid a distortion of competition, it is necessary to promote a license adapted to large projects which last as long as the duration of the project. A unique license, for various identified countries of destination, for series of components and associated technology, for series of users and valid all over the expected duration of a project, would be more adapted to Large Projects carried out abroad. 3) From an Export Control System to an Export Monitoring System The purpose of the Export Control System is to preserve exports of listed products from a possible use for the production of weapons of mass destruction. Having seen the actual export control organization and its impact on delivery delays, on distortion of the competition and on means (time and personal), export control is seen by exporters as a burden rather than an added value securing their exports. As cooperation between actors is a key factor for the success of every Export Control System, it would be necessary to upgrade the actual system by moving from a control system to a monitoring system. Exporters would not see Export Control as a constraint anymore but Export Monitoring as an added value. 4) Unique and clear international regulation to prevent distortions of competition (level-playing field). Extension of the level-playing field to the EU and to the world (urbi et orbi) Proliferation does not have any border and it is a common concern. In must be therefore collectively considered by all countries on an equal basis: by countries possessing the nuclear weapon and those which are not, by large and small countries, by Northern countries and Southern ones, by rich countries and the poor ones. This common issue will have to be tackled by all, without any exception, with the same rules. It will be treated by everyone with common rules (Unique International Regulation, INFCIRC 254 for example) without provoking distortion of competition and flaws in the system that would benefit violators. As often, a same regulation can be differently implemented by countries and even inside a same country can also be implemented differently by each administration of this country. It would thus be necessary to promote common supranational good practices, unquestionable and clear, which would apply to everyone in a standard and coherent way. Unique procedure, unique license, same conditions to obtain a license, same documents to support the request, same warranties, same duration of treatment and validity without letting any flexibility for interpretation. A unique regulation and a unique implementation would allow a better harmonization between States and thus an increased motivation of exporters to develop an Export Control culture (Monitoring). It would also avoid the existence of conditions for a distortion of competition.
CONCLUSION The BOTTICELLI Project is a contribution and an answer to 1540 Committee s invitation expressed during the Wiesbaden project meeting in Frankfurt in November 2014, aiming at an enhanced cooperation and a better dialogue between the institutions, governments and the industry. Through the BOTTICELLI Project, industries: - commit to common principles which are the basis of the Dual Use Export Control and a basis of the 1540 Resolution, - proposes guidelines in the respect of the actual regulation, and proposal to better clarification of the regulation - proposes a new export control system risk based approach more adapted to the modern industrial organization and supply chain based on an effective partnership between Industry, Institutions and Governments.