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Diplomacy in Action

Global Transshipment Seminar

Vann Van Diepen
Principal Deputy Assistant Secretary, Bureau of International Security and Nonproliferation
Dubai, United Arab Emirates
March 7, 2011



Good Morning, Dr. Gargash, Ambassador Al Shamsi, Ambassador Olson, ladies and gentlemen. It is a pleasure for me to be back in Dubai.

I would like to extend my thanks to the Government of the United Arab Emirates for co-hosting with the United States this Global Transshipment Seminar. We are all here to address the risks to international trade and global security posed by the diversion of sensitive items in transshipment.

I want to emphasize the word “WE.” We all share a responsibility for preventing the misuse of transshipment by those who would harm global security and our economic prosperity. This is a challenge that no one nation can solve on its own. I am gratified that all of our governments all recognize this by having us meet here for the next two and a half days.

I would like to begin by outlining the challenges we all face in working to prevent proliferation in transshipment. I will then outline the best practices we believe could go a long way toward addressing this challenge. I will then conclude with some thoughts for your consideration and discussion while you are gathered here in Dubai.

First let’s talk about the challenges: The proliferation of weapons of mass destruction (WMD), including their means of delivery, as well as of advanced conventional weapons, is among the gravest threats to global security and regional stability. President Obama said as much in Prague in 2009, when he shared his vision for a world without nuclear weapons nearly two years ago. Proliferant states and terrorist groups continue seeking to acquire mankind’s most deadly and destructive weapons.

As potential source countries adopt international best practices in export controls and the United Nations adopts various Security Council Resolutions requiring states to control and prevent various proliferation-related transfers, it is becoming difficult for proliferators’ to gain direct access to strategic items. And proliferators are responding in increasingly adaptive and creative ways, seeking alternative suppliers such as overseas distributors; using front companies, cut-outs, and brokers to facilitate and conceal diversion; falsifying documentation, end-users, and end-uses; and – most important for this conference -- using circuitous shipping routes and multiple transshipment points to obscure the actual destination of their shipments, places where it is easier for them to hide proliferation-related shipments among a vast amount of legitimate and fast-moving trade.

Transshipment is a reality of the international trading system, essential to maintaining the expeditious free-flow of trade. Transshipment hubs generally have substantial commercial, logistical, and financial infrastructures, often with associated free trade or special economic zones, aimed at facilitating legitimate trade activities. Although these work to the benefit of legitimate activities, proliferators take advantage of this practice to camouflage illicit activities. The frequency with which this occurs is high. But it is just as much a reality that major transshipment hubs have been singled out by proliferators as a critical part of their efforts to evade the global framework of trade controls. The risk of diversion of sensitive items in transshipment therefore is a significant international security issue, and the central reason for this conference.

Our challenges in controlling proliferators’ misuse of transshipment are constantly evolving. I want to briefly discuss four of them.

First of all, the size and velocity of legitimate transshipment trade is high and growing. In a global economy, sensitive items are produced by more and more companies around the world. And more and more small and medium enterprises inexperienced with international trading norms are entering the export marketplace. The same is true for distribution channels, which have also grown with the global economy. And containerized shipping has accelerated international trade through lower transportation costs and higher cargo load capacity.

Second, our task also is complicated by the increasing interest of proliferators in dual-use items, not just weapons and items only used in weapons. Especially as proliferators move toward indigenous production of weapons, they seek for use in those weapons production programs items that also have equally legitimate commercial applications.

Many of these dual-use items have weapons applications significant enough to warrant control by the multilateral regimes—the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group, and the Wassenaar Arrangement. In addition, however, proliferators seek items that fall just below the threshold of regime controls – in order to avoid those controls. They also seek items with no counterparts on regime lists -- such as basic chemicals, electronics, and structural materials – items that are key building blocks of weapons production programs, just as they are of any industrial activity.

The challenge for us is to identifyand dealwith those relatively few listed and unlisted dual-use items intended for proliferation programs hiding in a sea of such items for legitimate uses requires catch-all authorities, information-sharing (both domestically and internationally), and industry outreach – all issues that we will be addressed over the next few days.

Third, we all face the challenge of improving our ability to search, seize, investigate and prosecute trade control law violations with minimal impact on the high volume of otherwise legitimate trade. Given that various UN Security Council Resolutions provide us the legal authority to search, seize, and dispose of a wide array of proliferation sensitive goods, we need to ask ourselves what types of targeting and enforcement mechanism will help us uncover violations? How prosecutions can help us deter future proliferators? How can states provide incentives to their enforcement personnel to uncover illicit diversions, without fear that those enforcement personnel will unduly hamper legitimate trade? Without proper regulation of transshipment activities, transshipment hubs will continue to be the prime target for proliferationefforts. These circumstances compel regulators and enforcement agencies to find technically feasible and economically viable ways to fight back.

The fourth and final challenge is self-imposed – the misperception that adopting and enforcing export and transshipment controls is bad for business and as another speaker today will make clear, this simply does not hold up to economic analysis. Indeed, it has been our experience that U.S. companies seek out locations and business partners with strong export control systems to ensure the safety of their products and shipments. Moreover, effective risk management techniques are available that focus enforcement efforts on the small fraction of trade in sensitive items while improving port operations efficiencies. This fosters a secure trading environment that does not unfairly burden legitimate traders and ultimately makes a transshipment hub more attractive to trading partners, investors, and economic operators.

Let me talk about potential best practices for coping with the challenges:

Our responsibilities as States are not just to monitor the export of sensitive goods produced in one’s own country -- we must also be vigilant to the flow of sensitive goods that are imported and re-exported, and those in transit or transshipped through our territories, as reflected in the requirements of UNSCR 1540 to have controls on transit and transshipment, not just exports. We all share a common responsibility to take measures to dissuade proliferators from misusing transshipment while also minimizing the impact of such measures on global commerce. Recent efforts by our host government, the UAE, as well as the government of Malaysia, to address this challenge are commendable and can serve as a model for other transshipment hubs facing similar challenges. It is especially appropriate that this meeting is being held in the UAE.

We believe that there are some common best practices all nations and jurisdictions should adopt in applying trade controls in transshipment. Obviously, the more countries adopt these best practices, the better prepared they will be to detect and stop illicit trade and the less likely their trading systems will be abused by proliferators who seek to exploit loopholes and weak links in the international system. While every transshipment hub has slightly different considerations, “best practices” can provide a layered, mutually reinforcing defense strategy against illicit procurement efforts.

I would like to suggest ten “best practices” as the basis upon which we can build effective international transshipment security measures.

1. First to have a transparent and interagency-coordinated legal and regulatory system that comprehensively controls items for export, re-export, transit and transshipment that extends fully to activities within free trade zones, and is consistent with the guidelines and lists of the four multilateral regimes and relevant Security Council Resolutions.

2. Ensure for listed items that licenses are required for the transshipment of all munitions and nuclear items, and for all exports of other listed items at least to countries and end-users identified as being of proliferation concern or those endeavors acting on their behalf. Coordination with the exporting country, as appropriate, to ensure that transshipments of listed items are consistent with the intent of the exporting country.

3. Ensure catch-all authority controls all items in transit and transshipment where there is a reasonable suspicion that the items are intended to be used in WMD, their related delivery systems, or conventional arms. 

4. Adopt internationally endorsed requirements for manifest collection in advance of the arrival of all controlled goods, regardless of their end destination. This would provide the governments the ability to vet transactions against known end users of concern and for inconsistencies that raise suspicion, and do it in time to stop and seize the transaction utilizing catch-all controls if necessary. The WCO SAFE Framework provides a multilaterally accepted data model to simplify for shippers how this information can be selected, formatted, and transmitted. 

5. Encourage industry to develop stronger internal compliance programs, and conduct focused outreach to manufacturers, distributors, brokers, and freight forwarders to raise awareness of their export control obligations and the potential penalties for non-compliance. A robust government-industry partnership in the context of transit, transshipment, and re-export is essential to effectively safeguard circumstances of transshipment trade from proliferation related activities.

6. Provide adequate resources and training for customs and enforcement officers so that they can identify proliferation-related items, including increasing cooperation between enforcement agencies and licensing authorities and other sources of technical assistance.

7. Fully use inspection authorities for cargos of potential concern, and adopt and deploy appropriate screening technologies—both non-intrusive inspection and radiation detection.

8. Make full use of authorities to seize and dispose of cargos of proliferation concern. Limit enforcement officials’ personal liability for the conduct of routine investigations of shipments.

9. Institute effective penalties sufficient to punish and deter proliferation-related transshipment activities. Prosecute transshipment violations to the full extent of the law and publicize prosecutions as a deterrent.

10. Establish and maintain information sharing exchanges with counterparts in other countries and ensure timely replies to inquires for assistance.


In conclusion, let me urge you to use the next few days to discuss in greater detail the themes I’ve highlighted this morning. Let’s thoroughly discuss and share our individual best practices and find practical solutions to our common challenges. Over the course of this seminar I would like for each break-out session to tackle the relevant questions: What are the legal and regulatory authorities necessary to effectively control this trade? How do we build-up the capabilities of licensing units to effectively and efficiently vet transshipment transactions? What enforcement, targeting and prosecutorial techniques will help us best deter proliferators in transshipment hubs? How do we involve the brokers and freight forwarders in the conversation to find creative ways to facilitate the movement of fully compliant, legitimate trade so that compliance becomes an opportunity for profit and not a burdensome expense?

Your ability to effectively answer these questions and meet these challenges will go a long way toward our collective efforts to strengthen export controls and build a safer, more secure world. Our task is clear, and I look forward to productive discussions as we work together to find effective solutions to this complex problem. By focusing our attention on this growing concern, by working together to overcome the challenges, and by applying appropriate best practices, we can all contribute to preventing proliferation and making the world a safer and more economically vibrant place. Thank you very much!

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