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The UK’s Trade Sanctions and Export Controls Explained

Author: Syedur Rahman  12 April 2024
7 min read

As with many countries, the UK operates trade sanctions and export controls. This article explains what these are, how they operate and gives a brief summary of the United States’ system.

What are UK trade sanctions?

Trade sanctions are controls on the:

  • Import, export, transfer, movement, availability and acquisition of goods and technology.
  • Provision and procurement of services related to goods and technology.
  • Provision and procurement of certain other non-financial services.
  • Involvement of UK people in these activities.

Trade sanctions prevent certain activities being carried out. But there are specific circumstances in which it is possible to engage in an activity that would otherwise not be allowed because a trade sanction has been imposed.

It can also be possible to obtain a licence to allow an activity to be carried out that would otherwise be prohibited (not allowed) under a trade sanction.

Why does the UK impose trade sanctions?

Trade sanctions can be imposed by the UK on another country or an organisation (such as a business) or an individual. They are imposed to stop the target of the sanctions from carrying out particular activities, such as trade or financial transactions. This can be done for a variety of reasons.

What is the main aim of trade sanctions?

Trade sanctions are imposed for a wide range of reasons. But, in general terms, the aim of them is to stop a person, organisation or country from carrying out a particular activity. This could be trading or being involved in financial transactions.

This can be done to:

  • Enforce international laws and ensure countries honour international agreements.
  • Safeguard a country’s economic interests by protecting its industries from competition from similar businesses in other countries.
  • Promote behaviour change in a country, such as ensuring human rights standards are met or that nuclear weapons are not built or obtained.
  • Affect a country’s foreign policy.
  • Protect national and international security.

Who is responsible for trade sanctions and export controls in the UK?

The UK implements sanctions through regulations established under the Sanctions and Anti-Money Laundering Act 2018. This Act provides the legal basis for the UK to impose, update and lift sanctions. It is the responsibility of everyone in business to make sure that they are complying with all sanctions at all times. 

Who is responsible for UK sanctions policy?

The Foreign, Commonwealth & Development Office (FCDO) is responsible for overall UK policy on sanctions. The Department for Business and Trade (DBT) implements trade sanctions and other trade restrictions and has overall responsibility for trade sanctions licensing. 

Who publishes the UK sanctions list?

The UK government publishes the UK Sanctions List, which provides details of those designated (which means have been made the subject of sanctions) under the Act and the reasons for them being designated.

Who grants trade sanctions licences in the UK?

It is the DBT’s Export Control Joint Unit (ECJU) and its Import Licensing Branch that receive and consider applications for trade sanctions licences. If an application for a licence is successful, the applicant will then be allowed to carry out certain activities (such as exporting goods to or importing goods from a particular place) that would not otherwise be allowed under trade sanctions.

What is The Office of Financial Sanctions Implementation (OFSI)?

The Office of Financial Sanctions Implementation (OFSI) is an organisation within the UK government’s Treasury that ensures all sanctions are properly understood, implemented and enforced in the United Kingdom. 

While OFSI is the primary organisation responsible for financial sanctions implementation, other agencies such as the National Crime Agency (NCA), the Crown Prosecution Service (CPS), the Serious Fraud Office (SFO), His Majesty’s Revenue and Customs (HMRC), and professional regulators and overseas enforcement agencies also have a role.

OFSI works closely with the NCA. Both the NCA and HM Revenue and Customs (HMRC) will refer cases for prosecution to the CPS. The SFO may also investigate and prosecute sanctions offences if they meet its criteria for taking on a case, such as if there was a connection to international bribery or serious or complex fraud.

What is The Office of Trade Sanctions Implementation (OTSI)?

Early 2024 is expected to see the creation of the Office of Trade Sanctions Implementation (OTSI). This will be part of the DBT, will work alongside OFSI, and will have responsibility for ensuring that trade sanctions are properly implemented and enforced. OTSI will be given legal powers and the UK is set to introduce a system of financial penalties for trade sanctions violations. 

Who is responsible for trade and export sanctions and controls in the US?

BIS, Licences and the Entity List

The United States Department of Commerce’s Bureau of Industry and Security (BIS) regulates and enforces U.S. export controls under the Export Administration Regulations (EAR). 

The EAR contains a list of foreign businesses, governments and private organisations and individuals that are subject to specific licence requirements for the export or transfer (within a country) of specified items. This is known as the Entity List, which is found in Supplement No. 4 to Part 744 of the EAR.

The Entity List details the licence requirements for each business, organisation or individual that is on it. These licence requirements are separate – and in addition – to licence requirements imposed elsewhere in the EAR. 

BIS will consider licence applications relating to any business, organisation or individual on the Entity List. The process is similar to the application process in the UK, where it is OFSI (the Office of Financial Sanctions Implementation) that grants licences to enable activity with any person or organisation that is the subject of financial sanctions.

BIS will make its decision according to all relevant licensing policies. But even if one policy provides grounds for approval of a licence, BIS will refuse a licence if there is another policy that provides grounds for denying a licence.

OFAC and the DDTC

The United States Department of State’s Directorate of Defense Trade Controls (DDTC) regulates and enforces U.S. export controls relating to items that may have use by military or intelligence services under the International Traffic in Arms Regulations (ITAR).

The United States Department of the Treasury, Office of Foreign Assets Control (OFAC) regulates and enforces U.S. economic sanctions restrictions against designated parties, which can be individuals, organisations, regions or countries. These can include; 

  • Restrictions on US people’s activities in particular destinations or involving restricted individuals
  • Exports to certain people, organisations, areas or countries
  • Restrictions on other transactions - including imports - and travel.

What are UK export controls?

Export controls are measures that are in place to oversee the movement of certain items. In the UK, the Department for Business and Trade Export Control Joint Unit (ECJU) administers the system of export controls and licensing for military and dual-use items (which are items that are designed for non-military use but can be used for military purposes).

Export controls are used as part of the UK government’s aim of controlling the risks posed by weapons of mass destruction, human rights abuses and terrorism. They can make it necessary for those in certain lines of work or business to apply for a licence from ECJU to continue with their activities.

They can apply to the movement out of the UK of:

  • Physical Items – meaning the physical movement of tangible goods such as equipment, materials and parts.
  • Non-Physical Items – such as the sharing of intangible assets including text messages, emails, phone calls or information held on computer servers.

What is the difference between trade sanctions and export controls?

The main difference between trade sanctions and export controls is in their application. Export controls are applied to certain specific items, with a licence being required by those who wish to export those items. Economic sanctions, however, are not usually specific to a particular item.

What goods do export controls apply to in the UK? 

The two main categories of goods that export controls apply to in the UK are:

  1. Goods, software and technology that are specially designed or modified for military use. Examples  include weapons, ammunition, bombs, tanks, imaging devices and military aircraft.
  2. Dual-use items, which are goods and technologies that could be used for both civilian and military purposes. They can range from raw materials to parts and complete systems, such as nickel alloys, semiconductor chips or thermal imaging cameras. They can also be items  that could be used in the production or development of military goods, such as machine tools, chemical manufacturing equipment and computers.

The full details of such items are contained in the UK’s consolidated list of strategic military and dual-use items that require export authorisation. You can view the list here.

What is The Export Control Act 2002?

The Export Control Act 2002 was the piece of UK legislation that enabled controls to be imposed on the exporting of goods, the transfer of technology, the providing of technical assistance overseas and activities connected with trade in controlled goods.

What is The Export Control Order 2008?

The Export Control Order 2008 is the main export legislation. It  brings together all the previous export controls and has itself been updated by a number of amending orders. 

It controls the:

  • Export of strategic goods.
  • Transfer of technology and the provision of technical assistance.
  • Trade of military equipment between overseas countries where any part of the activity takes place in the UK.
  • Trade controls with destinations where an arms embargo has been imposed by the UK 

It also details any exemptions that may exist and the practicalities of record-keeping requirements.

Under what circumstances do UK strategic export controls apply?

The UK’s export controls apply in any situation where someone intends to export or transfer goods, software or technology or provide brokering services.

A licence must be applied for from the Department for Business and Trade’s Export Control Joint Unit (ECJU) if:

  • The items to be exported are on the UK’s consolidated list of strategic military and dual-use items that require export authorisation. The list includes items that are controlled because of international agreements or arrangements or because of the UK’s own defence or security concerns.
  • There are concerns about the intended use of the items - or about the person who intends to use them - once they have been exported.
  • The items are covered by trade sanctions.

It is the responsibility of the person looking to export items to check whether those items require an export licence. 

How to Apply for an Export Licence

Applying for an export licence requires registering on SPIRE, which is the Department for Business and Trade’s Export Control Joint Unit online export licensing system. 

Anyone making an export licence application must have an account with SPIRE. They must also be able to produce a range of details, including;

  • Information about the movement and use of the items to be exported
  • The person who will receive them (the end user)
  • Any involvement of third parties.

These factors will be assessed before a decision is made about whether to grant a licence.

More information on the process and the precise types of licence is available here

Conclusion

Trade sanctions and export controls are often used by countries as a reaction to the activities of other nations. While this is done for  political reasons, it can have a major effect on those looking to do business with other countries. 

This makes it vitally important that those involved in international business are fully aware of the trade sanctions and export controls that are in place – and know how to comply with them. If they are unsure of any part of this, they should seek expert legal advice.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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