September 28, 2018
KEY FINDINGS & RECOMMENDATIONS
The Pacific Forum and the Diplomatic Academy of Vietnam, with support from the US State Department’s Export Control and Related Border Security Program, held the third Seminar on Strategic Trade Controls in Southeast Asia in Hanoi, Vietnam on July 24-26, 2018. Nearly 50 senior scholars and officials attended in their private capacity. Off-the-record discussions focused on structures of strategic trade control (STC) systems and the status of national STC implementation in Southeast Asia. There was also discussion on the relationship between UN Security Council Resolution (UNSCR) 1540, strategic trade controls, and sanctions. Each session included presentations to introduce the topic followed by a discussion offering all participants the opportunity to pose questions and share related ideas and experiences.
“STC is about monitoring, not about forbidding trade.”
Key findings from this seminar include:
STC is a filter to channel strategic items, ensuring that they go to the right users and are blocked from the wrong ones. Developing a national STC system should be a means to promote global harmonization of concepts, definitions, and procedures that facilitate legitimate trade and make the supply-chain secure – thus helping countries that are trading across multiple borders gain a better understanding its trade flows. STC is therefore a trade management system as well as a way to integrate local industries into the broader international economy. By developing a robust STC system, smaller countries can gain access to high-tech manufacturing and move up the supply chain.
While they share the common feature of classifying traded items, there is an inherent incompatibility between the Harmonized System (HS) used by Customs and STC control used by licensing agencies. Because an HS code describes what an item does while STC control codes reflect how an item can be used for developing weapons, HS codes cannot replace export control codes. While harmonizing HS codes with export control numbers can improve detection, it would be better to utilize existing HS in STC practices rather than trying to amend the HS itself. HS codes could be used to assist with self-classification and can also help in identifying trends in international trade, such as industrial sectors that can be potentially exploited by proliferators, or where re-exports of commodities are going.
Singapore’s practice of advance export declarations and the United States’ Container Security Initiative are important schemes for facilitating efficient monitoring of goods passing through ports. The WCO has recommended advance screening of cargo, but not many countries have actually implemented such a practice.
Through the Authorized Economic Operator (AEO) program, Customs officials balance economics and security by providing incentives to the best exporters for responding to the needs of Customs. Such programs have a logical application for STC, even if they are not designed for STC. Incorporating STC compliance into the AEO scheme should be the next step, although Customs will likely resist such integration.
Numerous programs and projects exist to assist countries with complying with UNSCR 1540 obligations and to develop their STC systems. These include non-governmental organizations such as the US’ Stimson Center and the UK’s VERTIC, and intergovernmental organizations such as the Financial Action Task Force on Money Laundering (FATF), the World Customs Organization (WCO), the International Atomic Energy Agency (IAEA), and the Organisation for the Prohibition of Chemical Weapons (OPCW). Many US agencies also provide or fund outreach, especially the Department of State via its Export Control and Related Border Security (EXBS) program, the Bureau of Industry and Security (BIS) at the Department of Commerce, the Defense Threat Reduction Agency (DTRA) at the Department of Defense, the Department of Justice, the Customs and Border Protection Agency, and the Department of Energy. The European Union, South Korea, and Japan are among others that offer assistance with UNSCR 1540 implementation and/or STC development.
The European Union, the United States, and Northeast Asian countries have enhanced their focus on controlling technology transfers, beyond simply controlling goods and technologies. Advanced countries are (reverting to old practices of) covering more than WMD-related items, using export controls as a way to moderate foreign policy (i.e., influence or restrict relations between countries). This Western approach to STC and export controls affects how people in Southeast Asia view STC. The divergence in approach to STC exposes an underlying difference in interests, where the West is more focused more on security but Southeast Asia is more focused on economics.
Advancements have been made in implementing STC in Southeast Asia – the Philippines, Thailand, Vietnam, Myanmar, Cambodia, and Laos provided updates on their progress in developing STC legislation, industry outreach programs, and Customs enforcement practices. The EU P2P export control program and efforts from the WCO, the United States, South Korea, and Japan have resulted in tangible progress on these fronts. Less progress has been made, however, toward achieving ASEAN regional economic integration.