Refusal of China-Destined Export Licensing More Than Doubles Under Tighter Rules

Shipping containers pictured at the Port of Felixstowe in Suffolk, England, on Aug. 21, 2022. Joe Giddens/PA Media

The number of licence refusals for exports to China has more than doubled in 2022 because of the UK’s tightened control over goods and tech with military applications, a minister has said on Wednesday.

Rosemary Pratt, director of the UK’s Export Control Joint Unit, told a defence exports conference in London that the increase was “largely” because of an update to the military end-use (MEU) export control rules, which she said had a “a big impact” on exports to China.

The policy update, which took effect in May 2022, expanded the use of MEU controls and added China, Hong Kong, and Macau to the list of destinations subject to an arms embargo.

The rules apply to licensing decisions for the export, transfer, brokering, and transit of goods, software and technology subject to control for strategic reasons.

As a result, “our processing times and our refusal rates are higher for exports to China than almost any other destination, and this trend is just going upwards,” Ms. Pratt said.

“Those are exports that previously we couldn’t have prevented that now we’re able to prevent, and we know that’s a big impact.”

According to the statistics published by the government, 252 Standard Individual Export Licence (SIEL) applications for exports to China were refused in 2022, compared to 119 in 2021 for China and Hong Kong.

An annual report (pdf) published in July said the refusal rate for China SIEL applications in 2022 was 11.9 percent, more than quadrupling the average rate of 2.5 percent.

But China is also the destination with the highest number of SIELs, 1,074 in 2022, the report said.

“This is because it is a permitted destination on fewer Open General Export Licences than other countries and a large destination for commercial exports.”

Official data show three criteria have been used in the refusal of China and Hong Kong SIEL applications in 2022.

The criteria of international obligations, such as U.N. sanctions and treaties, were used 135 times. National security was cited 88 times, and 128 refusals mentioned the risk of the goods or tech being diverted to an undesirable end-user or for an undesirable end-use, data show.

The refusals include export applications for goods and tech for military use, non-military use, and those that can be used for both.

The statistics also show no applications for China Open Individual Trade Control Licences and Standard Individual Trade Control Licences, and both applications for Hong Kong was refused, with one listing Serbia as the source of the goods and the other one listing Turkey.

According to the trade journal Export Compliance Daily, Ms. Pratt said the unit has been seeing “more complex” applications after the rule was tightened.

“So that affects the whole system,” she said, “because it’s not like I’ve also been given 25 extra people.”

It took longer to process applications involving China, which was done on a case-by-case basis.

In 2022, just over half (53 percent) of the China SIEL applications were completed within 20 days, compared to 62 percent of all SIEL applications; and 81 percent of the China SIEL applications were completed within 60 days, comparing to 89 percent of all SIEL applications, the government’s report says.

Ms. Pratt said her unit is currently reviewing how the updated rule has worked and is hoping the complete the review in autumn.

“Has that played out as we expected? Has it fitted with the policy intention? And what’s the impact?” Pratt said of the criterias being examined.

“There’s a whole set of businesses who are very, very concerned about the impact,” she added.

The new Strategic Export Licensing Criteria was introduced to replace retained EU rules.