Seminar on Strategic Trade Controls in Southeast Asia

August 8-9, 2016
Bangkok, Thailand

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The Pacific Forum CSIS, with support from the US Department of State’s Export Control and Related Border Security Program held a workshop on strategic trade controls in continental Southeast Asia in Bangkok, Thailand, on August 8-9, 2016. Some 30 Cambodian, Laotian, Myanmar, Thai, and Vietnamese mid-level officials representing agencies involved in licensing, customs, and general policy development and observers attended, along with 15 individuals from the broader Asia-Pacific and the United States and Europe. The off-the-record discussions focused on international trade and strategic goods, the core components of an effective system of strategic trade controls, national legislation, licensing, enforcement, interagency coordination, industry outreach and internal compliance programs, an assessment of national program implementation, and the role of strategic trade controls in the ASEAN Economic Community.

Key Findings and Next Steps

Calling forth top-level official’s political will to promote implementation of a national strategic trade control (STC) program is crucial first step in developing a national STC system. Incremental implementation of elements of a STC program is important and facilitates quicker implementation rather than waiting until all components of the program are ready for implementation. Top-level officials from countries with robust STC systems should engage in dialogue with leaders from other countries to reinforce the importance of implementation.

In promoting the value of STC implementation in Southeast Asia, it is important to highlight that a robust national STC system can attract foreign high-technology investment in the region. A robust STC system can contribute to enhancing investor’s confidence in secure trade environment that can lead to economic development of the region.

Establishment of a single focal agency for STC that interacts with other agencies can contribute to enhancing the efficiency of STC system. Having multiple responsible agencies can delay STC process and hinder trade facilitation. It is necessary to streamline the organizational structure centered on a single nodal agency. Ministry of Trade or Commerce should be considered as a first and best option as most of trade-related issues are handled by those agencies. 

STC implementation is most efficiently accomplished by developing a legal framework through one primary law that establishes legal authorities and identifies key relationships, which is specified through a regulatory framework. The primary legislation provides a basis for STC implementation with broad language, and detailed rules and procedures can be stipulated by regulations with control lists. In taking this approach, countries in the Southeast Asia can take an incremental approach to STC implementation.

National legislation for STC must have provisions for penalties for violations. However, it is important to recognize that there must be some consideration that mistakes and missteps are likely to occur, especially in the early stages of the implementation process. To promote a sense of collaborative support between government and industry, punishments should not be overly severe and rigid enforcement should be avoided to ensure full implementation of an effective STC program.   

Controlling brokering activity is a key component in trading activity in Southeast Asia. Therefore, it is important to establish a linkage between proliferation financing and STC. Legal and regulatory instruments for STC should be designed to control proliferation financing or to have a linkage with other legislation controlling such activities.

Classification of strategic goods is an area that requires close cooperation between the national authority and industry. The government needs to help the private sector in identifying their license requirement while the private sector should provide their technical knowledge of industry to the authority.

Transparency in the STC licensing process can be enhanced through the establishment of robust IT infrastructure. IT infrastructure for STC can reduce the likelihood of corruption by reducing the amount of face-to-face interaction and creating better oversight of the transaction process.  It should also be stressed that paperless information sharing between agencies through IT infrastructure can contribute to faster processing and trade facilitation.

Finding essential factors that contribute to successful prosecution of catch-all violations was identified as an important area to be explored. Participants shared concern regarding the difficulty associated with substantiating an exporter’s clear intent to proliferate when bringing cases to prosecution.

Close coordination and active information sharing between customs and licensing agency is important for enhancing the effectiveness of STC enforcement. Emphasis should be placed on mutual trust between customs and licensing authorities. 

It is important to ensure that actual end-use and end-user are consistent with the information provided throughout the transaction process from the initial application for the export license through post-shipment verification. Diplomatic missions can carry out post-shipment verification albeit with limited in resources. A better approach would be to establish a post-shipment reporting mechanism in which the exporter requires the end-user to verify the end-user after a certain period of time from the shipment.

Given a number of stakeholders involved in global trade, it is important to highlight that the target audience of STC outreach should include not only manufacture but also other entities such as shipping companies, freight forwarders, warehouse operators, brokers, and other government agencies.

In organizing outreach activities, it is necessary for the national authority to ensure those involved have a good understanding their industry and the trends in national trade patterns. Identifying dual-use industrial sectors with high volumes of exports makes planning outreach more efficient.

Multi-national companies (MNCs) can play an important role in introducing the global standards for internal compliance programs (ICPs) in Southeast Asia. Large MNCs can leverage investment promises to encourage small-medium enterprises (SMEs) in their supply chain to implement ICPs. Also, national authorities can gain a better understanding of international standards by incorporating MNCs in their outreach activities.

The ASEAN National Single Window (NSW) initiative is a good basis for establishing the basic infrastructure for STC. Integration of STC into NSW will enhance STC licensing and enforcement by optimizing complex data sharing between agencies. Also, it should be highlighted that introducing STC into the country’s NSW will contribute to solidifying STC implementation in the ASEAN region and facilitate integration of STC requirements to ASEAN Single Window in the future.

There is a wide range of views in the region regarding the value of integrating strategic trade management requirements into the ASEAN Single Window initiative. Some participants thought it would help solidify trade controls in the region, while others argued it would be too difficult to implement. There was general agreement that success or failure would depend on the specific ways in which strategic trade management principles were integrated into the ASEAN Economic Community.

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