In 2013, the UK Government refused 196 export and trade licence applications. Each refusal imposed heavy costs on the exporter concerned: marketing effort wasted, compensation payments for broken contracts, reputation damaged. But in most cases, refusals can be avoided. Here are four tips.
First, though this may seem to contradict the main argument, don’t be too quick to rule out markets which suffer from political instability or embargoes. These typically include high growth economies, offering potentially high rewards. Lord Livingstone, UK Minister for Trade, has emphasised that expanding exports to such markets is a priority for the Government, as a key means of delivering growth in the UK economy. Yes, a handful of destinations – Syria, DPRK – you’d be right to leave in the ‘too difficult’ basket. But for the rest, the risks exist but with a bit of effort they can often be managed.
Second, check the rules. Of the 196 refusals, half were because the export would have contravened either a UK embargo (26 – e.g. related to Argentina), an international embargo (30 – most for Libya, Iran and China) or a treaty commitment (27 – mostly related to counter proliferation). The rules are readily-accessible (ECO’s website) and rarely require expensive legal expertise to interpret so there’s little excuse for getting it wrong.
Third, check your end user. A quarter of the refusals were due to the risk of the export being diverted to an ‘undesirable end user’ e.g. terrorists, criminals or WMD proliferators. Sophisticated proliferators can be hard to spot. But the basics are straightforward: does the end user have a reputable record and a credible end use for your export? If you have suspicions, ECO can help.
Fourth, a quarter of all refusals were because there was a clear risk that the export might be used for internal repression. This can require a subjective judgement by Ministers. But exporters can and should make such judgements for themselves before starting marketing. Look at the human rights record not only of the country as a whole but, more specifically, your end user(s). The main concerns may be limited to only one or two agencies in a country, typically the police or internal security bodies, while the mainstream military are less likely to pose problems.
Licence refusals do happen and they are costly. Avoiding those costs requires a relatively minor investment in due diligence, which can be the key to unlocking the substantial returns to be found in the high growth, emerging markets.