Insights & strategic thinking
Thought Leadership
What is sovereign capability? A strategic guide for defence leaders and procurement teams
TLDR No longer just a policy concept, sovereign capability has become a central issue in defence strategy and procurement. In practice, sovereignty is shaped by supply chains, alliances, and regulatory control; and, for defence leaders, it must be actively managed, not assumed. Key insights Sovereign capability is increasingly shaped by supply chains, alliances, and export controls Defence procurement decisions determine long-term control (not just cost) “Full” sovereignty is rarely achievable. Most capability is conditional Governance, compliance, and visibility are central to maintaining operational control Sovereign capability has become one of the defining themes in modern defence. It sits at the intersection of geopolitics, procurement, and industrial strategy, and is increasingly shaping how nations design, build, and deploy military capability. Yet, despite its prominence, the concept is evolving. For defence leaders, the challenge is not simply to define “sovereign capability” in traditional terms, but to understand what it actually requires in practice, and where its limits sit in a deeply interconnected global system. Why this matters For defence organisations, sovereign capability directly affects operational and commercial outcomes: Programme delivery timelines can be shaped by external approvals and licensing Supply chain dependencies can introduce hidden strategic risk Regulatory frameworks can constrain how systems are deployed or exported Procurement decisions increasingly determine long-term control, not just cost Understanding sovereign capability is therefore essential to protecting both operational readiness and strategic autonomy. Independent, expert trade strategy & horizon scanning → What is sovereign capability in defence? At its simplest, sovereign capability is a nation’s ability to design, produce, maintain, and deploy defence capabilities independently. This includes traditional and digital weapons of war, military strength, firepower, and related complex goods, software, or hardware. However, the concept extends further. It includes not just physical ownership of platforms, but control over the systems, technologies, and decisions that govern their use. This encompasses industrial capacity, supply chain visibility, and the ability to act without external constraint. That distinction is important. As with Australia’s acquisition of SSN-AUKUS submarines under AUKUS, a nation may possess advanced defence assets, but still rely on foreign technology, components, or regulatory approval – in this example, via ITAR – to operate them. In this sense, sovereignty is not absolute. It exists on a spectrum. In other words, capability does not always equal autonomy, and ownership does not always equal control. Why sovereign capability matters in modern defence strategy The growing focus on sovereign capability reflects a shift in the global defence environment. Geopolitical fragmentation, export controls, and supply chain disruption have all made reliance on external actors more complex and, in some cases, more risky. As a result, governments are reassessing where control must sit, and how much dependency is acceptable. Sovereign capability has, therefore, become a question of national resilience. It influences whether a nation can act independently, how quickly it can respond to emerging threats, and how exposed it is to external political or regulatory pressure. For defence leaders, this translates into tangible concerns around delivery, readiness, and long-term strategic positioning. Sovereign capability and defence procurement For most defence organisations, sovereign capability is ultimately realised (or constrained) through procurement. Procurement decisions determine not only what is acquired, but where capability resides, and who controls it over time. Increasingly, this requires a shift in thinking. Where procurement was once driven primarily by cost and performance, it now must account for resilience, control, and regulatory exposure. Procurement trade-offs in the defence industry As such, modern defence procurement involves navigating a set of competing priorities: Priority Strategic benefit Associated risk Global sourcing Access to advanced technology and scale Increased dependency and regulatory exposure Domestic production Greater control and national resilience Higher cost and longer delivery timelines Rapid procurement Accelerated capability deployment Reduced scrutiny and potential compliance gaps Collaborative programmes Shared cost and innovation Constraints on sovereignty and operational freedom These trade-offs are not easily resolved. They must be actively managed, at boardroom level, as part of a wider defence strategy. The role of the UK defence industry in sovereign capability As the world’s second-largest defence exporter, the UK plays a not-insignificant role in the industry globally, with an established pedigree and leadership in disciplines such as advanced manufacturing, systems integration, and defence services. These capabilities position the UK as both a potential contributor to allied programmes and a developer of strategic capabilities in its own right. However, at the same time, the UK operates within a highly interconnected, complicated, and often tense international ecosystem. Supply chains are global, technologies are shared, and regulatory frameworks – particularly end-use agreements and export controls – shape how capability can actually be developed and deployed. This creates a dual reality: the UK does hold clear industrial leadership in some domains, but it also faces structural dependencies that influence how sovereign its capabilities can be in practice. Sovereignty vs collaboration: can defence alliances deliver both? With few exceptions internationally, modern defence capability is not built in splendid isolation. The world of defence is more connected than that. Alliances such as NATO and AUKUS determine how nations access technology, share costs, and accelerate innovation. However, collaboration introduces its own constraints. Shared systems and technologies may be subject to external controls, including export licensing and usage restrictions. This can limit how capability is deployed or transferred, even when it is nominally “owned” by a national government. As a result, sovereignty and collaboration must be balanced carefully. Sovereignty, in this context, is less about independence and more about management of interdependence – understanding where control is retained, where it is shared, and how those boundaries are governed. The operational reality: what sovereign capability requires in practice Delivery of sovereign capability depends on the underlying systems and processes that enable organisations to operate effectively, within a constrained and sensitive environment. Two areas are particularly critical: Governance, compliance, and control Export controls, licensing regimes, and national security regulations all play a central role in shaping how defence capability can be used. To manage this, organisations must develop robust governance frameworks that ensure: Accurate classification of components and systems Clear visibility of regulatory obligations The ability to demonstrate compliance under audit Without this governance infrastructure, sovereignty becomes difficult to exercise in practice, regardless of strategic intent. Supply chain visibility and industrial resilience Modern defence systems rely on complex networks of suppliers, often spanning multiple jurisdictions. Understanding these dependencies – and their associated risks – is essential. A single component can introduce regulatory constraints, or a single supplier can create costly strategic vulnerability: as we saw in the AOG Technics fraud case. For defence organisations, sovereignty increasingly depends on how well these risks are identified, monitored, and managed. The cost of sovereign capability Conventionally, sovereign capability is usually framed as a strategic imperative, but it does come with measurable costs. There is financial investment, yes, but organisations must also consider increased complexity, longer procurement timelines, and higher governance overheads. In some cases, pursuing a traditional idea of “unconditional sovereignty” may require duplication of capability that would otherwise be shared across alliances. For nations, this raises an important question: what level of sovereignty is necessary? For many, the answer lies not in absolute independence, but in identifying critical capabilities where control must be retained, and accepting some level of dependency elsewhere. Is sovereign capability realistic in 2026 and beyond? As defence systems become more complex and interconnected, the idea of a complete and unerring national autonomy is becoming harder to sustain. Supply chains are global, technologies are shared, and regulatory frameworks are increasingly influential. In this environment, sovereign capability is evolving. Rather than being absolute, it is becoming more: Selective, focused on key strategic capabilities Conditional, shaped by alliances and regulation Actively managed, through governance and procurement decisions This perspective changes how the notion of sovereign capability should be approached. Sovereign capability as a strategic discipline Sovereign capability remains central to defence strategy, but it is not a simple concept to define. Rather, in the modern era, it is more of a movable feast. It is constantly reshaped by procurement choices, constrained by regulation, and pressure-tested through operations. It requires organisations to balance independence with collaboration, and control with efficiency. For defence leaders, the challenge is not simply to “achieve” sovereignty, but to understand where it matters, how it is constrained, and how it can be maintained over time. Because – in modern defence – sovereignty is not assumed, and nor is it perennial. It is something that must be intentionally designed, built, and continuously managed, as the sands of international geopolitics continue to shift. Borders For the Boardroom the clearBorder podcast Listen now on Spotify → Listen now on Apple →
Thought Leadership
End‑user and end‑use screening: a practical guide for modern export compliance, including military end-use insights
TLDR This article explores the role of end-user and end-use screening in modern export compliance. We explain how verifying who receives your products and what they intend to do protects against diversion, sanctions breaches, and dual-use violations. Military end-use vectors receive particular attention, highlighting the high-risk stakes. Gain insights into building a robust screening programme, closing common governance gaps, and transforming screening from a regulatory necessity into a strategic advantage for operations across complex global supply chains. In modern global trade, knowing who is buying your goods is just as important as knowing what they will do with them. For many traders, that distinction – between end-user and end-use – sits at the heart of effective export controls compliance. In short, an “end-user” is the entity taking possession of the product or asset, while “end-use” relates to the intended application of that product or asset, whether civilian, commercial, or – more complicated in nature – sensitive military purposes. Regulators are paying closer attention than ever. Unchecked transfers can result in diversion to prohibited parties, violation of dual-use goods export controls, or inadvertent breaches of sanctions regimes. For multinational boardrooms and senior strategists, this is not dismissable as technical box-ticking: a failure in your end-user and end-use screening programme has the potential to jeopardise market access, commercial success, reputational standing, and regulatory trust… in addition to creating opportunities for serious national security breaches. As well as mitigating the risk of penalties, a robust internal compliance programme signals to partners, customers, and regulators that your organisation truly understands the geopolitical risks that can sit within trade operations, and takes proactive steps to safeguard against them. This is why – with dual-use technology, sensitive goods, and complex supply chains – screening has become a boardroom-level imperative. Why this matters Effective end-user and end-use screening protects your business from regulatory, operational, and reputational risks. Multinational firms that integrate these checks strategically can anticipate diversion, safeguard market access, and navigate high-risk military or dual-use transactions with confidence; turning a compliance requirement into a competitive advantage across global trade operations. → Borders for the Boardroom: Christopher Salmon on supply chain resilience Listen now on Spotify and Apple Music Core principles of screening End-user screening: knowing your customer End-user screening starts with verifying the identity and legitimacy of your buyers. This would include: Confirming the entity’s legal registration Any beneficial ownership Ensuring they are not listed on any denied party or restricted lists In order to handle this efficiently, international firms increasingly rely on digital databases, third-party verification services, and automated tools to make these checks both thorough and scalable. Jurisdictional frameworks vary, so 360° awareness is crucial. For instance, the U.S. EAR outlines specific end-user obligations, while the UK Export Control Order and EU Dual-Use Regulation impose parallel (but not necessarily identical) requirements. A sound grasp of these differences allows companies to structure a compliance programme that is defensible across multiple jurisdictions, and thereby reduce the risk of inadvertent violations. End-use screening: understanding their intent While knowing your customer is essential, understanding the intended application of your goods – end-use verification – is equally important. Specifically, companies must assess whether distributed products/assets could be used in military, nuclear, or other sensitive sectors. Red flags include attempts to divert technology, opaque supply chains, or participation in high-risk industries. Strategically, end-use screening protects market access and ensures regulatory compliance – preventing costly border seizures or license revocations. By documenting the intended use and conducting periodic reviews, businesses create a robust audit trail that demonstrates proactive risk management and the capability to accurately assess export control risk. What is military end use screening? Military end use screening is a specialised layer of end-use checks, focusing on items that have the capacity to be applied in defense or armed forces contexts. Beyond conventional dual-use considerations, this involves analysing whether a product might be incorporated into military hardware, weapon systems, or technologies that could have national security implications. Companies must implement structured processes to comply with military end-use controls, including obtaining explicit declarations, reviewing supply chain touchpoints, and verifying customers’ operational profile. Integrating these steps ensures high-risk transfers are flagged early; helping protect global market access and mitigate potential sanctions exposure. Why military end use is more heavily regulated Unlike “ordinary” and purely commercial goods, technologies with potential military application sit on a geopolitical fissure. More than just products, they represent capabilities; when they move across borders, they can shift military balance, weaken sanctions, or quietly empower actors that regulators are actively trying to constrain. That is why military end-use screening is treated as a matter of national security, not trade administration. Items that frequently trigger military-end-use scrutiny include: Advanced semiconductors and micro-electronics Encrypted communications and networking equipment Sensors, radar, and imaging systems Navigation, positioning, and guidance technologies Aerospace, drone, and unmanned-system components Materials and software with weapons, surveillance, or battlefield applications Frameworks such as the Wassenaar Arrangement exist because once these capabilities escape from approved or intended channels, they are practically impossible to pull back. For boardrooms, the major risk is in becoming part of a security failure that regulators, partners, and markets will not easily forgive. Practical steps for assessing military end use Military end-use screening is about understanding how commercial technology can migrate into strategic capability. This is where export compliance becomes a question of governance, risk appetite, and geopolitical exposure. A mature programme treats military end-use assessment as a decision framework; not a form. Risk lens What to ask Why it matters Customer identity Is the buyer, beneficial owner, or end user connected to armed forces, defence ministries, or military-linked contractors? Many military procurement routes are indirect, using commercial or civilian front entities. Intended application Is the product going into aerospace, surveillance, telecoms, energy, advanced manufacturing, or security infrastructure? These sectors are possible pathways into military programmes. Technical capability Could the item enhance targeting, communications, navigation, monitoring, or weapons systems – even if sold as civilian? Dual-use risk is driven by what technology can do, not how it is marketed. Geography Is the destination country subject to arms embargoes, defence controls, or elevated security scrutiny? Military diversion risk rises sharply in sensitive regions. Transaction behaviour Are there unusual shipping routes, intermediaries, or urgency around delivery? These are classic indicators of diversion or concealment. Common governance gaps Even within a well-functioning global supply chain, without careful oversight, controlled technology can travel farther, faster, and more invisibly than ever. Misaligned supplier due diligence or gaps in downstream end-use verification can silently erode compliance integrity. Recordkeeping is another common blind spot: incomplete documentation opens the possibility for audit failures. Moreover, the digital aspect of modern trade further complicates matters – SaaS solutions, cloud platforms, and virtual product access can cross borders in ways that traditional compliance frameworks may struggle to capture. Another layer is added by collaborative R&D and joint ventures. When proprietary technology moves between entities, even for testing or development, it can constitute a controlled transfer. Third-party distributors, complex international logistics, and multiple layers of subcontractors increase the risk that items will reach unintended end users. How to build an end‑user and end‑use screening programme The most successful international traders treat screening as an integrated part of their export compliance programme, linking legal, operational, and risk-management functions across jurisdictions. The goal is to prevent diversion, reduce regulatory friction, and anticipate high-risk vectors (particularly military end use) before goods or technology leave the facility. Therefore, a modern programme balances technology, process, and human judgment. Boardrooms can use a strategic checklist to ensure robustness: Map all products and services subject to dual-use and military end-use controls. Maintain up-to-date denied party and sanctions lists across all jurisdictions. Verify beneficial ownership of customers and intermediaries. Document declarations of intended end use and conduct pre‑shipment checks. Integrate ongoing monitoring, audits, and horizon scanning for regulatory changes. Embed escalation protocols for high-risk or ambiguous transactions. Train teams across sourcing, sales, legal, and logistics on end-use risk awareness. Screening is strategic. Not administrative Ultimately, end-user and end-use screening is best understood as the lens through which multinational firms can interpret their market access, supply chain integrity, and global reputation. Each verification exercise, documented declaration, and pre-shipment review represents legal diligence, yes, but more importantly, a signal to partners, regulators, and markets that your company operates with transparency and control. Strategic screening also helps mitigate the very highest-risk exposures. Organisations that detect and manage these risks early reduce the likelihood of border delays, serious enforcement actions, or reputational fallout. End-user and end-use checks must be embedded into enterprise-level governance – not siloed within operations or legal teams. Cross-functional alignment ensures that sourcing, R&D, IT, and logistics decisions are informed by compliance realities, while proactive monitoring and horizon scanning help anticipate regulatory shifts. In this way, screening turns from an operational headache into a source of competitive advantage. Companies that master it move faster, trade more confidently, and safeguard both revenue and reputation: creating a strategic lever for sustainable global growth. Contact clearBorder today →
Thought Leadership
Building commercial resilience with geopolitical risk forecasting
TLDR As we move towards 2030, and cross-border boardrooms face increasing turbulence, geopolitical risk forecasting has become a key capital allocation tool. Tariff volatility, sanctions layering, export control expansion, ESG enforcement, and maritime instability are all reshaping commercial decision-making. Firms that translate geopolitical signals into pricing, sourcing, contracting, and governance choices build structural resilience – while those that treat geopolitics as background noise risk absorbing avoidable shocks. Among executive teams, there may be a temptation to treat geopolitical disruption as cyclical. We see some executive teams interpret turbulence in the trading world as a troublesome, but temporary, condition. A conflict flares, a tariff is introduced, a sanction list expands, markets react and stability, eventually, returns. But the pattern of the past five years suggests that instability is not episodic, but enduring and cumulative. For instance: Trade policy is routinely deployed as a tool of leverage and statecraft. International regulatory systems are diverging, not converging. Industrial policy is being weaponised in pursuit of strategic autonomy. Maritime and logistics routes are politically exposed. Compliance regimes are branching into ESG, forced labour, and beneficial ownership transparency. Within this environment, geopolitical risk forecasting is much more nuanced than simply spotting news headlines early. It is about identifying the potential for structural shifts early enough to adjust strategy proactively, and thereby protect commercial positioning. Why this matters Geopolitical turbulence shapes margin, liquidity, market access, and investor confidence. Integrating geopolitical risk forecasting into governance protects capital and preserves optionality, while only responding after disruption materialises opens the door to compounding shocks that can erode competitiveness and long-term resilience. Real-world lessons The rapid reconfiguration of U.S. tariff authority The collapse of the IEEPA tariff regime and its replacement with Section 122, and then 301, demonstrate how quickly duty exposure can change. Pricing assumptions that were valid in January were rendered obsolete by March. The lesson → legal foundations matter as much as headline rates, and statutory fragility translates into pricing fragility. Maritime vulnerability in focus Shipping diversions around the Cape of Good Hope, combined with renewed tensions affecting the Strait of Hormuz, have reintroduced physical geography into corporate risk modelling. Freight premiums rise before vessels are blocked, and insurance markets can tighten before cargo is delayed. Energy pricing volatility ripples through chemicals, aviation, agriculture, and heavy industry. The lesson → risk often manifests through secondary effects (such as insurance, financing, or fuel) before it appears in delivery schedules. Export controls as industrial policy Semiconductor, end-use, and dual-use controls are instruments of competitive positioning. Derivative rules increasingly pull third-country firms into regulatory scope: a product assembled in one jurisdiction may inherit restrictions from a component sourced elsewhere. The lesson → jurisdictional exposure is now embedded in bills of materials. Cyber disruption As we saw in the case of the Jaguar Land Rover cyberattack, manufacturing can be halted and logistics interrupted by threats rooted in the digital world. Cyber incidents such as this show that, today, commercial systems are deeply interdependent. A compromised supplier, customs intermediary, or third party can disrupt trade flows just as much as a port closure. The lesson → even for firms dealing in physical goods, digital fragility is commercial fragility. Ethics enforcement as border enforcement Forced labour detentions and ESG-driven scrutiny reveal that reputational and regulatory exposure increasingly converge at the border. Governance lapses can freeze inventory in transit. The lesson → morals and values-based regulation has operational consequences. The horizon as of March 2026: where stress may emerge next Tariff layering and statutory creativity With multiple trade statutes now in use (as in the U.S.), the probability of overlapping or sector-specific tariffs is high. Retaliatory measures by affected partners remain plausible. Even modest rate changes are likely to compress margins when stacked on existing duties and customs compliance costs. Sanction expansions in increments Rather than sweeping embargoes, recent patterns point towards gradual additions targeted at individuals, sectors, financial restrictions, or shipping designations. The commercial impact can accumulate quietly, in narrowing payment channels, shifts in insurance availability, or counterparties becoming higher-risk. Semiconductor concentration and technology bifurcation Tensions affecting semiconductor supply chains are unlikely to resolve in the near future. Advanced manufacturing and AI-related hardware are particularly sensitive to export licensing regimes. Fragmentation of technology ecosystems could increase compliance complexity for firms operating across multiple blocs. Energy corridor risk Escalation in the Gulf region continues to create volatility risk for LNG, oil, and petrochemical flows. For energy-intensive sectors, this becomes a forward margin issue rather than a spot-price issue, because markets price based on geopolitical probability – even in cases where physical disruption is absent. Regulatory divergence in ESG and SPS Environmental, social, and governance obligations are expanding across jurisdictions. Equally, SPS measures are divergent depending on region, particularly in agri-food and biotech sectors. This creates non-identical compliance architectures, and the potential for cost asymmetry between markets. Industrial overcapacity and protectionism Allegations of excess manufacturing capacity in steel, chemicals, renewables, and EV components may translate into further investigations and trade remedies. Protectionist responses tend to arrive quickly, with limited time for firms to pivot strategy. From intelligence to decision architecture The difference between monitoring and forecasting lies in application. Where monitoring asks: what’s happening, or already happened? Forecasting (or horizon scanning) asks: if this happens, what changes inside our business? Therefore, the value in geopolitical forecasting is in the way it informs: Sourcing strategy: where are we overexposed to single jurisdictions? How quickly can we reconfigure suppliers? Contract design: do pricing structures account for tariff variability? Are force majeure clauses calibrated for regulatory intervention? Capital allocation: does planned investment assume regulatory convergence that may not materialise? Market prioritisation: are certain jurisdictions becoming structurally less predictable? Where commercial exposure can accumulate For a firm to assume they are diversified simply because they operate globally is laden with risk. In reality, risk concentration can hide in plain sight. For instance: A critical subcomponent sourced from one politically sensitive region. Dependence on a single export market vulnerable to retaliatory tariffs. Licensing reliance on evolving export control classifications. Contracts dependent on stable cross-border payment channels. It’s worth underscoring again that – while these exposures might not be critical in isolation – they compound exponentially when layered. Modern trade disruption is compound because tariffs can coincide with sanctions, energy volatility can overlap with cyber incidents, and regulatory divergence might intersect with ESG enforcement. Truly effective forecasting, therefore, must model correlation as well as probability. Building geopolitical forecasting into governance For cross-border boardrooms, forecasting should include elements such as: Structured exposure mapping: product-level tariff sensitivity, sanctions touchpoints, licensing dependencies, supplier geography. Integrated external intelligence: policy tracking across major jurisdictions, not just home markets. Scenario stress-testing: modelling margin, liquidity, and delivery performance under multi-variable shocks. Clear oversight: defined risk appetite and escalation thresholds. Forecasting must have decision authority, not advisory ambiguity. Volatility is inevitable, while fragility is optional No firm can realistically insulate itself from geopolitical shocks completely. However, they can reduce the fragility of their position by: Diversifying input exposure Embedding compliance upstream Designing flexible contracts Aligning procurement incentives with risk-adjusted outcomes Integrating political risk into financial modelling The strategic dividend of foresight In a fragmenting global economy, predictability is valuable. Governments favour suppliers that deliver despite turbulence. Investors favour firms with visible governance discipline. Customers favour counterparties who do not pass on sudden shocks. In short, effective risk forecasting is preparedness translated into commercial advantage. For boardrooms then, the central question is: are geopolitical developments informing our strategy in real time, or being identified after already exerting an influence on our balance sheet? Ultimately, commercial resilience does not begin at the border, but is rooted in proactive horizon scanning. Contact clearBorder today for independent, expert horizon scanning and advisory →
Export Controls
5 takeaways from the 2025 Defence Export Conference, for trade leaders
When compliance meets geopolitics Recently, I attended the recent Defence Export Conference held in London, an event that has been running for several years. There was a good mix of attendees from industry, regulators, and law. A number of large defence and aerospace companies from the UK, Europe and the U.S. were also represented, such as BAE Systems, Rolls Royce, Nammo and Boeing, to name just a few. Here’s what I learned. TLDR The 2025 Defence Export Conference made one thing clear: compliance has moved from the back office to the boardroom. From AI-driven data and rising enforcement to new transparency laws and shifting global alliances, future-first trade leaders must now treat compliance as a strategic lever, not as a cost centre. The big picture The 2025 Defence Export Conference brought together industry leaders, regulators and legal experts to discuss how compliance, technology and geopolitics are reshaping defence trade. Several common themes emerged, including: The rise of economic statecraft The use of tariffs, sanctions and trade agreements – as seen in the U.S., where President Trump has used tariffs in particular to force governments to change the way they trade with the U.S., as well as a control mechanism to address issues such as fentanyl imports from Canada to the States. Enforcement escalation The U.S. is expected to announce five new Consent Agreements prior to the end of the year – a big increase from recent years. The Trump administration is rigorously pursuing companies breaching export control regulations, likely enabling diversion of controlled goods to prohibited/sanctioned countries and persons. Due diligence and screening, therefore, factor as essential parts of a robust compliance program. Compliance as a market enabler Delivering compliance was perhaps the most-discussed topic in the conference, with speakers describing compliance as both: An enabler through market access using licensing, transportation and new regulations A partnership builder Moreover, speakers discussed moving compliance from a cost centre to a strategic function in its own right, in an effort to shift the focus from reactive fixing to proactive action in the C-suite investing in compliance. Compliance = competitiveness Resilience = anticipation of risk Strategy = compliance aligned Data and AI One speaker described how the company he worked for – one of the biggest defence organisations – looked at transactional activity and common tasks that could be done with AI, thereby reducing the need for staff. They also shared some thoughts on delivering data required by the boardroom; to capture stakeholder attention, and help convey the importance of compliance. Geopolitics, technology, and emerging risks Within the ASEAN region, a poll had shown that – in trade – China is now the preferred partner to the U.S., with 50.4% in favour of China. On a separate note, warfare was described as more cost-effective through the use of new technologies in UAV capabilities, as opposed to multi-million dollar aircraft. This throws up a few important questions: are there concerns around infringement on MTCR? How will this be dealt with by regulators? And will traditionally-held definitions change? What the regulators are signalling EAR The program allowing free export of semiconductor manufacturing technology to fabricators in China has been terminated by the U.S. government, which is ending the Validated End User program for Chinese facilities. This action requires the likes of TTSMC and Samsung to apply for specific licences for any advanced technology they wish to send to their Chinese factories. While licences may be granted for existing operations, they will not be approved for expanding capacity or upgrading technology – effectively cutting off China’s access to the most advanced manufacturing processes. BIS Guidance issued for financial institutions emphasises the risks tied to Russia and China, creating possible Prohibition 10 violations for facilitation of unlawful trade. This guidance aims to prevent financial institutions from inadvertently violating the EAR by financing transactions that involve controlled items to these countries. To comply, BIS recommends enhanced due diligence, screening customers against restricted party lists, using post-transaction review to red flags, and avoiding wilful blindness to potential violations. Norway Transparency laws are enabling NGOs to attack customers and business partners using human rights legislation. The legislation applies to all larger companies domiciled in Norway, as well as foreign companies selling goods and services in the country. “Larger companies”, in this sense, are defined through the Norwegian Accounting Act. Companies exceeding the threshold for at least two of the following three criteria are covered by the Act: An annual turnover of at least NOK 70 million Balance of at least NOK 35 million An average number of 50 full-time employees or the equivalent annual man-hours NGOs also challenge ‘critical decisions’, and how that impacts ‘critical supply chains’. Companies are required to: Implement and carry out a due diligence process in line with the OECD Guidelines Publish due diligence strategies Transparently communicate human rights due diligence procedures, risks, activities, and findings on request Companies violating the law (or even failing to meet the requirements) face the risk of injunction or fines – so don’t wait until the last minute to start complying. Human rights challenges In Germany, lawyers have brought a case against the German government and defence companies for supplying Israel with defence articles for use in Gaza – claiming this breaches German human rights laws. Book a Consultation Ready to get expert help? Book a consultation today and take the next step. Book Your Consultation Building compliance from day one At a boardroom level, perhaps the most significant takeaway from the Defence Export Conference was the need to plan early for how compliance will work in: Projects Licence planning Applications These are the keys to success. As the conference made clear, export compliance is moving from the back office to the boardroom. Those who plan early – integrating licensing, data and governance – will not only stay compliant, but strengthen their global competitiveness. Contact clearBorder today for independent, expert trade consultancy →
Export Controls
Dual-Use Items: What Are They And Why Are They A Challenge?
Dual-use items are products, technologies, or materials with both civilian and military uses. These are goods which can be utilised for legitimate commercial purposes, however, they also have the potential to be modified for use in military or terrorist operations. Many technologies and products created for non-military uses can have qualities or features that make them appropriate for use in the military, which gives rise to the concept of dual-use items. What are the uses of Dual-use items? Dual-use items can have a variety of applications due to their versatile nature. Here are some examples of how dual-use items can be utilised in different contexts: Medical and Healthcare Applications: Advanced Imaging Technologies: Technologies developed for medical imaging, such as high-resolution cameras and sensors, can also be used for surveillance and reconnaissance purposes. Biotechnology Tools: Biotechnology equipment used for research in genetics and molecular biology can also have applications in the production of biological weapons. Information and Communication Technology (ICT): Encryption Software: Encryption software designed for secure online transactions and data protection can also be used to secure military communications. Satellite Communication Systems: Satellite communication technology used for global internet access can also be employed for secure military communication. Aerospace and Defence: Composite Materials: Lightweight and strong composite materials used in civilian aircraft manufacturing can also enhance the performance of military aircraft and missile systems. Navigation Systems: GPS technology, originally developed for navigation and location services, is crucial for military navigation and targeting systems. Energy and Power Generation: Advanced Batteries: High-capacity batteries developed for consumer electronics can be adapted for military use in portable equipment and vehicles. Power Generation Systems: Efficient power generation and storage technologies can benefit both civilian energy needs and military operations. Chemical and Manufacturing Industries: Chemical Precursors: Certain chemicals used in various manufacturing processes can also be components of chemical weapons, raising concerns about their potential misuse. Precision Machinery: High-precision manufacturing equipment used for producing complex consumer goods can also be used for manufacturing military components. Transportation and Logistics: Unmanned Aerial Vehicles (Drones): Drones developed for photography, surveillance, and package delivery can also be adapted for reconnaissance and even combat purposes. Electronics and Sensors: Sensor Technologies: Sensor technologies used for environmental monitoring can also have applications in military surveillance and targeting. Radar Systems: Radar technology developed for weather forecasting and air traffic control is crucial for military surveillance and defence systems. Nuclear Technologies: Nuclear Reactors: Nuclear reactors used for power generation can also be adapted for military propulsion systems in submarines and aircraft carriers. Radiation Detection Instruments: Instruments used to detect radiation in various contexts can be important for monitoring nuclear materials and preventing illicit nuclear activities. It’s important to note that while dual-use items have valuable civilian applications that contribute to technological advancement, their potential for misuse requires careful monitoring and regulation to ensure international security and prevent the proliferation of sensitive technologies. Types of Dual-use items These items can include a wide range of products and technologies, such as chemicals, electronics, software, machinery, and more. Examples of dual-use items might include: Advanced Materials: Certain materials with properties like high strength or heat resistance can be used in both consumer products (like aerospace components) and military applications (like missile casings). Computing and Software: Software and computing technologies designed for civilian use, such as encryption software, can also have applications in securing military communications. Biotechnology: Technologies used in medical research can sometimes be adapted for the production of biological weapons. Telecommunications Equipment: Components used in civilian communication networks can also be employed in military communication systems. Aerospace Technologies: Technologies developed for civilian aircraft can also contribute to the design and development of military aircraft. The dual-use nature of these items raises concerns about their potential misuse for purposes that threaten national security or violate international agreements. To monitor and restrict the trade of dual-use items and keep them out of the hands of entities or people who might misuse them, many nations have established regulations and export controls. These regulations aim to strike a balance between advancing technology and preventing the proliferation of dangerous technologies. Export controls on dual-use items typically involve licences and permits that must be obtained before certain items can be traded or moved across borders. These controls help ensure that technologies and products that could have both peaceful and potentially harmful applications are used responsibly and do not contribute to global instability or security threats. Challenges for Regulators Regulating items with legitimate purposes Dual-use items have the potential to advance scientific and human growth as well as build economic relations. Simultaneously, they pose a potential threat to global security objectives and the spread of weapons of mass destruction (WMDs). Regulators must develop an appropriate level of control so as not to hinder technological and economic advancement while mitigating risk to national and global security Export control regimes must keep pace with rapid developments in technology. Quantum computing, drones and AI are just some examples of the novel technologies challenging regulators to balance commercial demand and risk to international stability Identifying and assessing items Another challenge for regulation of dual-use items is the difficulty in identifying items that are designed for proliferation. Specialist knowledge, information, or advice is often required to determine the use and capabilities of the item and apply appropriate legal and regulatory restrictions. Context Context is another important component. For example, shipping drones to a well-established photography business in a low-risk country has different potential implications and risks than shipping drones to an unknown person in a high-risk country. Regulators must analyse not only the product, but also it’s potential end-use in each other nation. Challenges for UK businesses Identifying and assessing items Dual-use items are generally only export controlled when the items satisfy strict performance requirements or technical capabilities. Individuals may require technical expertise to correctly determine whether their goods are export controlled as ‘dual-use’ items. Additionally, some items can be described using general terms that do not clearly identify the item or its intended purpose. To enable individuals to identify dual-use items in spite of any vagueness or uncertainty, training is required. Many dual-use items are sold commercially and ‘off-the-shelf’. This can mislead people into thinking the goods are not subject to export controls. Licences may be required to share dual-use information orally or via electronic devices with a non-authorised person. A transfer of export controlled information can happen during a phone call, via email or even during an online or in person meeting. Applying for authorisation Companies or individuals can use the governments online licencing system SPIRE to apply for an export licence as required. The application process can frustrating for business and it can take some time to receive approval. Compliance Failure to adjust export practices to comply with the appropriate regulations and licences could result in sanctions for the individual or company; therefore, it is important to seek expert advice to avoid legal or financial repercussions. Conclusion Dual-use items may be freely available yet subject to the intricate laws and regulations of both UK and international export control regimes. Companies must be aware of their dual-use items and the implications of their export activities. Failure to keep up with the fluidity of these products’ restrictions can lead to violations with the potential of financial, and legal penalties. If you have any questions regarding dual-use items, it is important to seek professional advice. clearBorder’s team of expert consultants are ready to help you ensure correct classification of your items and compliance with the rules. About us clearBorder clearBorder provides independent advice on international trade, border systems, policies and processes. We deliver: online modular training suitable for individuals, teams or whole businesses to cut the risks and costs of trade across borders Independent consultancy to ensure compliance, adapt businesses’ supply chains and maximise efficiency expert insight into policy and technology shaping the future trade borders, to enable clients to maintain their competitive advantage We deploy our expertise and extensive partnerships across the freight forwarding, customs, policy-making and trading sectors to help our clients trade seamlessly across borders. Contact information If you require further guidance regarding dual-use items, please book a call with our team here.
