Your Excellencies, Ladies and Gentlemen, good afternoon!
That was an elegant statement by His Excellency Ambassador Hamad Al Shamsi from the Government of the United Arab Emirates. I can only echo his sentiments by congratulating you on a truly tremendous conference and extend my appreciation for the hospitality of our co-hosts. The expertise you have is impressive. I’m leaving here with a renewed sense that the community of nations is committed to the cause of a more secure world. I want to say thank you for your service to this greater cause.
The good news is that much of what we are doing is working. The system is not broken, and the current proliferation environment is better than many had feared it would be. Despite the efforts of irresponsible states and non-state actors to obtain weapons of mass destruction, the number of proliferators is small compared to the vast number of good-citizen countries. UN Security Council Resolution 1540 plugged a significant gap, and countries have made great leaps by instituting new laws and getting serious about enforcement.
Tough Challenges – Tougher Answers
However as we’ve also heard the past three days, the world community continues to face a serious challenge as irresponsible parties seek to exploit weaknesses in the international nonproliferation regime and misuse international commerce to acquire items and technologies for WMD, missile, and advanced weapons programs. The acceleration of global trade, the expansion of free trade zones, and the desire for increased access to advanced technologies for legitimate purposes require that we continue to strengthen our laws, licensing systems, and enforcement capabilities against exploitation by proliferators. Stronger nonproliferation partnerships are vital to maintaining the conditions of containment and deterrence, the best way to deal with these threats.
This is not an easy task. The world community faces more complex challenges than ever before in managing the risks of proliferation. We heard during the first day’s discussion about a range of proliferation risks – from intangible transfers of technology to free trade zones. Continued advances in technology make these risks more challenging to address. However, we heard from the UN 1540 committee and from governments about existing legal and enforcement tools, as well as new measures being developed that can help manage these proliferation risks.
In the presentations on dual-use brokering and catch-all controls, we saw the great challenges governments face in successfully implementing these regulations. Proliferators increasingly seek equipment and technologies that fall below control list specifications, meaning that catch-all controls are gaining in importance.
We heard about the challenges Free Trade Zones can present to effective nonproliferation trade controls. Enforcement agencies, usually Customs, need the authority to enter and enforce national laws on dual-use trade in such zones, as well as have close cooperation with special authorities that may operate there. Similarly, we now better understand the role financial institutions play in implementing counterproliferation finance standards. The Financial Action Task Force has been instrumental in advancing greater transparency and accountability standards among international financial institutions. Thanks to its efforts, global strategic trade control efforts are well supported by financial counterproliferation measures.
We had a great session on the first day discussing transit and transshipment, a topic which has received a great deal of attention in similar forums to this one due to its outsized importance. At transshipment hubs, WMD proliferators are able to camouflage their relatively small number of illicit shipments within a very large volume of fast-moving commercial goods. Illicit traffickers of all types have attempted to exploit these transshipment hubs to mask their illicit transactions as legal ones. Recognizing the importance of regulating transshipment trade, UNSCR 1540 obliges countries to control the transit, transshipment and re-export of related materials, as well as their export. Our responsibility is to assess where the loopholes are in our systems, identify and interdict illicit shipments, investigate and prosecute entities responsible for illicit shipments of proliferation-sensitive goods while minimizing the impact on legitimate trade.
We believe that there are some common best practices all nations and jurisdictions should adopt to ensure a level playing field for the application of trade controls in transit and transshipment. Some of these are laid out in the WCO’s Strategic Trade Control implementation plan. This plan describes key capabilities that Customs Administrations around the world must cultivate at senior management and front-line working levels in order to meet requirements of the SAFE Framework of Standards national obligations under UNSCR 1540. One best practice that I’ll highlight is the idea of a universal manifest for data collection on all relevant items using the WCO SAFE Framework data model. The idea is simple – your Customs agency would require a uniform manifest in advance of the arrival of all controlled goods, regardless of their end destination; this provides your government the ability to vet transactions against known end users of concern and for inconsistencies that raise suspicion, and the time to stop and seize the transaction utilizing catch-all controls if necessary.
We also heard from the private sector. I liken private industry to drivers, and the strategic trade control system may be compared to the traffic signals and speed limits we put in place to help manage traffic. Some drivers happily comply with posted speed limits, stop at stop signs, and drive safely. Some drive like maniacs, swerving through traffic to get where they’re going. Others will speed if they think they can get away with it. So we need to make sure that we properly educate and license drivers on the rules of the road; we create traffic signals that help improve the flow of traffic, while keeping everyone safe; we put traffic police on the streets, and at least in Washington, red-light cameras and speeding cameras to enforce the law, and penalties for those who break the law. The whole system strikes a balance between the two goals of safety and of facilitating the movement of people from point A to point B. As the drivers, private industry appreciates the rules of the road, which are applied the same to everyone, and which helps keep commerce flowing.
Private industry does not always appreciate the rules of the road when it comes to supporting strategic trade controls. In many countries we’ve gotten over the impression that strategic trade controls hurt trade, to the recognition that they actually help manage the risk of illicit procurement. However, on Sunday and today, we heard from industry participants who are happily complying with these rules, and most want a transparent and normalized process. For this reason, our continued partnership and dialogue with industry is vital.
Governments must conduct focused outreach to manufacturers, distributors, brokers, and freight forwarders to increase awareness of the threats and consequences of proliferation, emphasize the potential penalties for violations of strategic trade control laws, and encourage industries to develop strong internal compliance programs to distinguish between legitimate and illicit transactions. We heard about ways governments are creating incentives for industry members that show excellence in internal compliance and ways to encourage voluntary disclosure, and about the special need for governments to work with small and medium enterprises. We also heard from several speakers describe their industry outreach programs, including seminars, webinars, model industry compliance best practices, or ICPs, for different types of companies, publishing the names of companies with recognized ICPs as well as the information available on government or industry association web sites.
At the same time, the challenge of proliferation differs across countries. For example, in some countries only a very small percentage of companies export controlled items, whereas in others the percentage can be very high. Engaging small and medium size enterprises (SMEs) continues to challenge many countries. On the first day, we heard a view from industry on their role in controlling the intangible transfer of controlled technology. Catch-all controls constitute a special challenge: while it has been acknowledged by industry that listed items should not be exported, there is less acknowledgement that non-listed items that could be used for proliferation should be closely monitored.
Our economic prosperity depends in many ways on industry’s resilience and innovation. I hope we will leave this conference with greater respect for the tactical challenges our private sector faces and with renewed commitment to help industry comply with strategic trade control regulations by proactively engaging with industry to share information about best practices, inform industry about suspicious trends and end-users, and solicit industry’s feedback on our regulatory proposals. We heard from industry about the need to put in place transparent regimes and ensure predictable outcomes. Governments can continue to improve on how they work with industry in these areas, so they feel like a partner rather than an adversary.
International and Interagency Cooperation
We often talk about sharing best practices, and we have heard many of these during the expert presentations over the past three days. However, more often what they point to are the shared challenges and the need to strengthen the partnerships that advance international security and contribute to economic development. Our presenters and facilitators represented the mutually reinforcing partnerships within national governments, between governments and industry, and among governments and organizations internationally.
In this last roundtable, Craig Healy from the Export Enforcement Coordination Center (E2C2) mentioned the need for cooperation within your own governments to achieve success in export enforcement. Goodness knows this is a difficult task with everyone’s stove-piped functions. However, I’m heartened that we have representatives here from your ministries of defense, foreign affairs, as well as customs and economy – all partners in these efforts.
From our presenters and in our breakout sessions yesterday, we saw that partnerships between licensing and law enforcement authorities enable implementation of a coordinated nonproliferation policy on a national level and provide legal authority to take responsible action against proliferators. And we saw how cooperation among licensing, border security officials, and technical agencies can lead to responsible licensing decisions and strengthened detection and interdiction capabilities at the border.
While an appropriate and effective legal and regulatory framework is a good start, the exercises demonstrated the need for consistent and timely information sharing within government, with industry, and between governments; effective processes for identifying transactions of concern; and comprehensive risk assessment procedures. Most importantly, governments must set up dynamic and adaptable processes, and then have the political will to make these efforts work. The importance of having mechanisms for exchanging information with international partners is something that became apparent in the exercises. International organizations, like the World Customs Organization, are the torch-bearers in this since they set the standards.
We heard how cooperation between investigators and prosecutors can ensure justice for violators of strategic trade laws, and how improved cooperation between counterpart enforcement agencies across borders will deter proliferators from exploiting vulnerabilities in neighboring countries and enhance chances of interdiction.
As we were reminded of the definition of partnership, we saw examples of some of the elements that provide a basis for creating mutually beneficial relationships in strategic trade controls. They include:
International cooperation creates a framework in which we can achieve nonproliferation goals and economic development together. Many forms of international cooperation – bilateral and regional interaction, capacity building programs, centers of excellence, outreach of the multilateral export control regimes, or programs of the international organizations such as the WCO and UNODC – are advancing this goal.
As we close this conference, I hope that we’ve helped to strengthen the nonproliferation partnerships that advance international security and contribute to economic development. Our presenters and facilitators represented the mutually reinforcing partnerships within national governments, between governments and industry, and among governments and organizations internationally. We hope you found in their presentations ideas you can put into action in your own efforts at home.
We recognize that standing up effective national export control systems is a major effort and requires a broad political commitment. Yet our experience working with our partners on developing national export control systems indicates that flexibility to take meaningful regulatory steps immediately is possible, all while considering major regulatory overhaul. Moreover, there is no reason why each country seeking to develop their national export control system need reinvent the wheel. As my colleague Vann Van Diepen elaborated at the beginning of the conference, many countries represented here have taken these steps already. So, I urge you to reach out to your neighbors or trading partners that have recently undertaken export control reforms. Seek assistance through the UN 1540 Committee. And of course, turn to the EXBS program for the technical assistance your country requires.
You have received a flash drive with copies of our presentations, and you have the list of all our delegates, presenters, and facilitators. We hope you have had abundant opportunities to get to know one another, and that relationships you have established here will continue as you return home.
I’d like to thank our Emirati co-hosts, as well as the presenters, moderators, and participants in making this conference a success.
We hope you will communicate with one another about your efforts. And at our next conference, we would like to call on more of you to tell us about your accomplishments and successes.
I wish you safe travels home, and success in the year ahead. Thank You.