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November 2012

Antiproliferation: TacklingProliferation by Engaging the

Private Sector

A PROJECT ON MANAGING THE ATOM Discussion Paper

by Ian J. Stewart


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Discussion Paper #2012-15

About the Author

Ian J. Stewart is a research ellow with the International Security Program and the Project onManaging the Atom at Harvards Beler Center or Science and International Aairs. He is alsolead researcher on Project Alpha in the Center or Science and Security Studies at Kings CollegeLondon, a project that works to engage the private sector in countering prolieration.

Acknowledgements

Te author would like to thank the British Foreign and Commonwealth Oce or their supporto Project Alpha. He also would like to thank the sta o the Project on Managing the Atom atHarvards Beler Center and the sta o Project Alpha o Kings College London or eedback onearlier dras o this paper in particular, the author would like to thank Proessor Matthew Bunnand Proessor Wyn Q. Bowen.

Te Project on Managing the Atom would like to thank the John D. and Catherine . MacArthurFoundation or its generous support.

Copyright 2012 President and Fellows of Harvard College

Te author o this report invites liberal use o the inormation provided in it or educationalpurposes, requiring only that the reproduced material clearly cite the source, using Ian J. Stewart,Antiproliferation: ackling Proliferation by Engaging the Private Sector, (Cambridge, Mass.: Projecton Managing the Atom, Harvard University, October 2012).

Statements and views expressed in this discussion paper are solely those o the author and do notimply endorsement by Harvard University, the Harvard Kennedy School, or the Beler Center orScience and International Aairs.

Cover Image: Spools o carbon fber, usable or lightweight, high-perormance car parts, or highperormance centriuges or uranium enrichment.


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November 2012

A PROJECT ON MANAGING THE ATOM Discussion Paper

Antiproliferation: TacklingProliferation by Engagingthe Private Sector

by Ian J. Stewart


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Antiprolieration: ackling Prolieration by Engaging the Private Sector

AbstrAct

Tis paper exploits the concept o antiprolieration1 to analyze the potential ormobilizing the private sector in countering the prolieration o weapons o massdestruction. Illicit trade rom the international marketplace plays a direct role insustaining the nuclear and missile programs o several countries, including Iran, indeance o UN sanctions. Tese programs also prot indirectly rom trade-enablingservices, such as insurance, nancing, and shipping. It is argued that almost all rmswill work to avoid direct involvement with prolieration or a variety o reasons, butthat rms oten lack the systems, expertise, and inormation required to identiyillicit prolieration-related trade.

Tis paper sets out what measures the private sector should take in order tomanage the legal, nancial and reputational risks associated with involvement inprolieration-related trade, and makes recommendations to national authorities orhow to support antiprolieration. Tese recommendations center on the creationo partnerships between national authorities and the private sector. Strategically

engaging the private sector requires partnerships to be developed betweengovernments and businesses and, at the practical level, that a range o tools, services,and guidance materials also be developed. Te potential contribution o third-partyacilitators in developing and deploying antiprolieration is also examined.

1 In the 1990s Dr Bradley Roberts introduced antiprolieration as a notion capturing the spirito opposition to prolieration while encompassing a growing array o policy tools. See B. Roberts,From Nonprolieration to Antiprolieration, International SecurityVol. 18, No. 1 (Summer,1993), pp. 139-173. Te use o the term in this paper reocuses this same spirit o opposition, but inreerence to all measures that the private sector should take in order to prevent prolieration.


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Project on Managing the Atom | Beler Center or Science and International Aairs

Table of Contents

Foreword 1Preventing Prolieration through Supply-side Controls 3

Antiprolieration: Te Role o the Private Sector 5

Te Role o National Authorities 11

oward Integrated Compliance 18

Conclusion 21

Appendix: Partners Against Prolieration 23


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Antiprolieration: ackling Prolieration by Engaging the Private Sector


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Project on Managing the Atom | Beler Center or Science and International Aairs 1

Foreword

raditionally, nation-states have taken the lead in implementing the main elements o supply-sidenonprolieration measures, namely export controls and technology sanctions. During the Cold Warthe ideological conict between the western and eastern camps dominated strategic trade controlswith, or example, COCOM established to control western trade with communist countries.At this time, nuclear technology, and the advanced manuacturing capabilities involved in itsdevelopment, were largely concentrated in the military-industrial base maintained by each bloc.With the end o the Cold War, the privatization o the deense industry and the globalization oadvanced manuacturing capabilities, the ability o nation states to control strategic trade has nowbeen somewhat constrained. Te spread o the high-technology manuacturing base has also seenthe opening o new prolieration pathways, as demonstrated by A.Q Khans prolieration activitiesand the diversication o trade routes used by prolierators to sustain their programs by seekingtechnologies rom the international marketplace.1

Te response o the international community to these evolving strategic and commercial realitieswas to reinorce the state-centric approach through United Nations Security Council Resolution

1540 (2004), which sets out what supply-side controls national authorities must adopt to preventthe prolieration o non-conventional weapons. o date 168 o 193 countries have submittedimplementation reports to the committee established to oversee the implementation o 1540, andmany countries have since qualitatively improved the implementation o their supply-side controls.However, the risk remains that the globalized marketplace may be used as a source o technology tosupport the prolieration o non-conventional weapons.2 Iran is a key case in point: despite several UNSecurity Council Resolutions imposing sanctions that are binding on all member states, Iran continuesto illicitly acquire the sanctioned technologies it needs to sustain and expand its nuclear program.3

In a globalized marketplace the implementation o supply-side controls is increasingly dicult:the manuacturing base is increasingly dispersed; shipping routes are increasingly complex; and

businesses are increasingly multinational in both ownership and operation. Prolieration-sensitivedual-use technologies may also now be more commonly used in commercial and consumerapplications than has previously been the case.

Despite these challenges, sanctions continue to be the tool o choice or the international communityin responding to states that present prolieration concerns. Sanctions may be an attractive optionor supplier states because they have a degree o control over their adoption. For example, as a resulto diplomatic action within the UN Security Council or through domestic legislation, laws may bepassed that prevent the private sector rom conducting certain types o trade even in circumstances

1 On A.Q. Khans prolierant activities using export networks, see oremost: Sanger, D. E., Te Khan Network,

Conerence on South Asia and the Nuclear Future (Stanord, 2004), http://iis-db.stanord.edu/evnts/3889/Khan_net-work-paper.pd, accessed April 9, 2012. For a more recent example o attempts by Iran to procure maraging steel,aluminum 7075, vacuum systems and more in breach o sanctions, see District o Columbia Incitement 12-cr-00061,July 12, 2012.2 Letter dated February 1, 2012 rom the Chair o the Security Council Committee established pursuant to resolu-tion 1540 (2004) addressed to the President o the Security Council, available online at http://www.un.org/ga/search/

view_doc.asp?symbol=S/2012/79.3 Letter dated June 4, 2012 rom the Panel o Experts established pursuant to resolution 1929 (2010) ad-dressed to the President o the Security Council, available online at http://www.un.org/ga/search/view_doc.asp?symbol=S/2012/395.


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Antiprolieration: ackling Prolieration by Engaging the Private Sector2

when the use o orce would not be acceptable. Such laws may be enorced through borderinspections and by delivering threats o punitive sanctions against deviant exporters. However, thesame supplier states may only be able to exert inuence over the target state through diplomaticpressure because o the lack o an international body tasked with enorcing those commitments thatare binding upon states.

Nevertheless, supply-side controls include a range o measures which operate in diferent ways andplace diferent obligations on certain business sectors. While economic sanctions may prevent nearlyall trade with a target state, or more specically oil and gas-related trade and investment or example,targeted sanctions place restrictions on trade that could directly stimulate activities o concern orenable services to develop which could acilitate the evasion o sanctions. For example, by someestimates targeted sanctions imposed on Iran have delayed its nuclear program or up to six years.4

O course, the implementation and enorcement o laws can never be perect, and the nationalauthority is oten not in a position to control all activities within its jurisdiction because opractical and systemic limitations. Tese limitations include the limited resources availableto the national authority to promote awareness, outreach, and enorcement; the diculty in

detecting illicit trade when the prolierating state actively attempts to hide the true end use oillicit materials; and the imperative or legitimate trade not to be disproportionately burdenedby prohibitive controls. Moreover, individual companies with an in-depth knowledge o theirown market sector, technologies, and customer base are oten better placed than the nationalauthority to identiy instances o illicit activity, although oten they will lack the inormation andexpertise required to do so.5

Te purpose o this paper is to set out measures that national authorities and the private sectorshould take in order to improve implementation o trade controls and how they can be delivered inpractice. Te measures are based upon the principle o partnership between national authorities andthe private sector, a subject which Project Alpha based in the Centre or Science and Security Studies,

Kings College London, has been examining with the sponsorship o the British government.

4 C. Hope, MI6 chie Sir John Sawers: We oiled Iranian nuclear weapons bid, the elegraph, July 12, 2012.Available online at http://www.telegraph.co.uk/news/uknews/terrorism-in-the-uk/9396360/MI6-chie-Sir-John-Saw-ers-We-oiled-Iranian-nuclear-weapons-bid.html.5 Illicit activity as described here includes the acquisition o prolieration-sensitive goods using clandestine tech-niques and the use o services such as fnance, banking, and insurance to support programs o concern.


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Preventing ProliFerAtionthrough suPPly-side controls

Supply-side controls are measures used by sanction-sending states to control the trade in goodsor services with other countries in order to efect a policy goal. Tis umbrella term includes bothexport controls and technology sanctions, where export controls are proactive and nominally non-discriminatory in that they control a dened list o technologies and services regardless o recipient,and sanctions are reactive and discriminatory in that they are designed to afect policies within aspecic country.

While sanctions may be invoked by sender states simply to be seen to do something, a number ospecifc goals can be attributed to supply-side controls more generally.6 Tese goals may include:

Slowing prolieration by making prerequisite technologies more dicult and costly to acquire

Detecting prolieration attempts by highlighting prolieration-related procurement trends

Deterring prolierators, which may occur at two levels:

Where the ear o being detected can in act deter a country rom pursuing theacquisition o prolieration sensitive technology

Where the ear o designation deters a company rom conducting trade that contributesto prolieration (or that dees sanctions)

Dissuading prolieration by reinorcing the nonprolieration norm

Sanctions and export controls impose restrictions on a variety o activities ranging rom trade incertain sensitive goods to the prohibition o trade with designated entities. Tese tools can contributeto nonprolieration both directly and indirectly. A direct contribution would include preventing

an export o a material that was destined or use in an enrichment centriuge in Iran, or example,whereas an indirect contribution would involve disrupting the nancing or shipping o the materialto Iran. For the purposes o this paper, such indirect services are termed enabling services.

In ree-market economies it is usually the private sector that conducts trade and, as such, the abilityo supply-side controls to deliver the goals set out above is partly linked to the efectiveness othe implementation o these measures by the private sector, and partly linked to the ability o thenational authority to enorce controls on private sector activity.

Te aim o the international community and o national authorities should be two-old. First,to ensure that potential prolierators cannot directly access the prerequisite technology rom theinternational market place either illicitly or legitimately, thus slowing breakout. Second, sanctionedactivity must not be allowed to benet rom access to trade-related enabling services.

Illicit Procurement

Supply-side controls have been efective in slowing most instances o prolieration. Te response oprolierators to the international system o supply-side controls, however, has been to use deception,

6 Adapted rom the ramework presented in Neta C. Craword and Audie Klotz, eds., How Sanctions Work: Lessonsfrom South Africa (London: Palgrave Macmillan, 1999)


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smuggling, and illicit procurement practices to evade controls. Tese practices usually involve theacquisition o components, materials, and equipment in isolation, oten with only small, tell-talesigns indicating that ostensibly innocent trade is in act linked to prolieration.7 Te use o suchtechniques by prolierators means that compliance with legal requirements is not sucient toprevent a companys products rom being used to enhance WMD programs, and so the adoption o

antiprolieration principles by afected industries becomes central.Te number o rms actually afected by prolieration is relatively small; there are, in act, ew rmsthat manuacture key choke-point technologies which programs o concern could not be advancedwithout access to. Consequently, the engagement o such rms and the mobilization o the supplychain can help to counter even the clandestine acquisition o WMD-related materials. Te ollowingsection explores measures that rms in afected sectors should implement in order to prevent theirproducts rom aiding prolieration.

7 Project Alpha at Kings College London has been working to highlight the scope o illicit procurement in relationto WMD programs. See http://kcl.ac.uk/alpha or more inormation.


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AntiProliFerAtion: the roleoFthe PrivAte sector

It is the responsibility o the private sector to operationalize the requirements o nonprolierationmeasures as they relate to trade. While the ability o national authorities to control trade in strategictechnologies is constantly challenged by the efects o globalization and other dynamic actors,the supply chains o the private sector do have the potential to act as nonprolieration assets. Asmentioned above, rms are always better placed than the national authority to know their industrysector, customer base, and technology, and there are only a nite number o rms that manuacturethe items o highest prolieration concern.

At present, the responsibilities o national authorities relate to the regulation o the private sector:national authorities adopt as law lists o controlled technologies, and companies are required to seekexport licenses prior to exporting the controlled goods. Tis system is enorced by customs and borderprotection ocials who inspect shipments to identiy exports o controlled goods that do not havea license. However, this relationship requires a undamental reconsideration. In order to efectivelyrespond to the challenges posed by prolierant activities, there must be a shit toward sustainingpartnerships between national authorities and the private sector so that antiprolieration compliance

measures can be more easily adopted by industry. Both national authorities and the private sectormust implement such measures above the minimum standards o compliance i involvement inprolieration is to be prevented; and, let us be clear, it is in the interests o both to do so.

Recommendation

R1: National authorities should acilitate the development o partnerships with theprivate sector

Private Sector Implementation

Te requirements o supply-side controls vary rom industry to industry and rom sector to sector.Te obligations o each specic sector are explored below. Nonetheless, regardless o business sector,i requirements and obligations or managing prolieration risks are to be efective, the private sectormust implement a trade compliance system. As Brewer highlights, the private sector has no excuseor ailing to adhere to export compliance laws.8 For prolierators to be denied access to solicitedservices and technologies, rms in the sectors set out below must do the ollowing:

1) Adhere to the legal requirements o the jurisdictions within which they operate;

2) Undertake to implement the ollowing measures (adapted rom Brewer):

Implement a compliance system based on sector-specic best practices and integratethis system with the companys Corporate Social Responsibility Framework;

Develop and implement a corporate monitoring and detection system to identiyillicit procurement attempts or prolieration-sensitive goods;

8 Jonathan Brewer, Te private sector plays an important role in delaying the development o the Iranian nuclearprogram, Te Bulletin of the Atomic Scientists, November 30, 2012.Available online at http://www.thebulletin.org/web-edition/roundtables/iran-and-the-west-next-steps.


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Conduct background checks on customers and business partners using open-sourcematerial and, in consultation with relevant government departments, terminatebusiness deals with entities o prolieration concern;

All rms, regardless o sector or location, are prohibited by UN sanctions rom conductingbusiness with some entities. Te requirement or background checks on potential businesspartners does not stop here, however, with many national authorities also imposing additionalrestrictions when trading with entities known to be o concern. Some national authorities goas ar as to adopt extraterritorial measures that can apply even to rms outside the nationaljurisdiction. Finally, since not all entities o prolieration concern have been designated (orindeed even identied), rms should also conduct due diligence to veriy the bona fdesoan end user and end use when engaging in the trade o prolieration-sensitive technology orenabling services, in order to minimize the risk that the trade will support prolieration.

3) Share suspicious inquiries and counter actions with government agencies, departments,and the private sector (using third party intermediaries i necessary);

Diligent sales or compliance ocials working in industry can oten identiy illicit procurementattempts even when the national authority is unable to do so. Te detection and sharing osuch eforts can allow national authorities and others in the business sector to detect utureattempts by highlighting the latest entities and methodologies used by prolierators.

Such inormation is o intelligence value to governments and organizations with responsibilitiesrelated to nonprolieration, such as the International Atomic Energy Agency. Failure to collectand share such inormation can result in new procurement networks, ront companies, andmethods going undetected.

4) Commit to training sta against a compliance competence ramework or accreditationstandard endorsed by the national authority;

Implementing compliance in the private sector requires staf with knowledge and experienceo the conceptual and practical requirements o the eld, and training is the primary means bywhich such knowledge can be accumulated. Firms should undertake to train their staf againsta compliance competence ramework to ensure that the required skill-set is developed. Suchtraining might be developed with the assistance o private-sector consultancies and incorporatesimulation exercises designed to highlight the challenges aced by target entities.

5) Require subsidiaries and agents, including those overseas, to implement equivalentsystems;

6) Ensure business partners, brokers, and distributors, including those overseas, implement

equivalent trade compliance systems;

In working to evade export controls, prolierators oten target the overseas representatives orms engaged in the manuacture o the most prolieration-sensitive goods. Only by ensuringthat such overseas business partners employ equivalent systems can a rm be certain that theirgoods will not be diverted to a program o concern.

7) Adopt measures to protect the intangible technology (such as design and productioninormation) associated with prolieration-sensitive goods or processes;


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Lack o know how or expertise both types o tacit knowledge is one actor that preventsprolierators rom developing indigenous capabilities and capacity to produce prolieration-sensitive goods. It is almost always in a rms own interests to protect intangible technologiesas such inormation is commercially valuable.

8) Encourage relevant proessional bodies to adopt and disseminate the standards and

emphasize adherence to these measures via the companys website.

Regardless o how well any one rm implements export compliance, i others in the businesssector ail to do likewise then prolieration attempts could still succeed. rade associationsand third parties can, thereore, provide a orum to build condence between competingorganizations that compliance obligations are being adhered to by all parties.

Project Alpha has seen this in practice: at the projects sector-specic outreach events or thecarbon ber and alloys industries, or example, rms were reassured to discover that others intheir business sector shared experiences regarding the implementation o compliance.

Sectors AfectedTe prerequisite to the implementation o these antiprolieration measures is the provision oguidance on what rms should do to limit instances o prolieration. While the additional measuresmay not be required by statute or criminal law, they could nonetheless be promoted by embeddingthem into commercial or civil contracts and, in doing so, bind the parties to implementing them.However, antiprolieration measures vary rom sector to sector with, or example, those requiredin the nancial sector varying greatly rom those needed in technology exporting industries.Antiprolieration measures are relevant to the ollowing sectors:

Exporters: Tis category includes the manuacturers and distributors o physical goods andassociated intangible technologies. Te specic circumstances in which a license must besought varies between states, but typically includes the ollowing three situations:

Te goods are controlled and the destination is an entity outside the customs zone;

Te entity is designated or otherwise known to be involved in activities o concern;

Te exporter knows or has been inormed that the goods are designated or a WMDprogram or or a military program in a country that is subject to an arms embargo.

Shippers: Tis category includes ast-reight orwarding companies and reight-based shippingrms. ypically, such rms are obliged to act only when a party to the shipment is a designatedentity. However, such rms may also be asked to ship controlled goods without a license.

Insurance rms: Tese include those that insure individual rms or insure other insurancerms. In addition to identiying whether a prospective client is a designated entity, insurancerms should also ensure that their clients have a compliance system in place and have ceasedhandling illegal business, including in relation to sanctioned activities.

Financial services rms: Banks and other nancial institutions are obliged not to conduct businesswith designated entities and destinations. U.S. and U.K. sanctions, in particular, designate


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the whole Iranian nancial system, meaning that banks operating in these territories (or thoseoperating elsewhere that wish to comply with U.S. extraterritorial measures) must ensure that notransactions take place with any Iranian nancial institution unless a license has been granted.

Academia / researchers: Export controls and sanctions apply as much to academia as to otherbusiness sectors, although a balance must be struck with academic reedom. Researchersin academia or elsewhere are likely to possess intangible inormation that could be o useto prolierators. Academia and proessional bodies have a responsibility to ensure thatappropriate controls are in place to manage these prolieration risks, even when no legalobligation exists. In practice, this may be addressed through codes o practice rather thanthrough laws and legislation.

Export compliance consultants: Numerous consultants provide compliance-related guidanceto individual rms. It is the responsibility o such consultants to provide guidance that is wellinormed.

Businesses operating in each o these sectors must take measures to avoid direct or indirect

involvement in prolieration.Recommendation

R2: National authorities should set out or the insurance, exporting, and nanceindustries the measures that should be implemented in order to counterprolieration, including dening the scope o WMD programs as relevant or theindustry sector.

Private Sector Support or Antiprolieration

Firms are clearly willing to adopt best practice trade compliance measures. In a survey conducted

by Project Alpha o 50 British rms in 2012, 53 percent o respondents indicated that they wouldadvocate that their rm adopt best practice compliance driven by a commitment to corporateresponsibility, with a urther 32 percent advocating adoption driven by a need to manage risks moreefectively. Only 9 percent o respondents would advocate adoption driven by a desire to secureincentives such as access to discretionary license types. Overall, the survey results clearly indicate thatmost private sector rms are prepared to work with national authorities to counter prolieration-related trade. 9

Te same survey ound that 52 percent o respondents would do more than is legally required inrelation to compliance.

Tese ndings are reinorced by interviews. Project Alpha has directly engaged with more than 300

rms, most o which have taken measures beyond those strictly required by law.

By applying an analytical ramework to the drivers or compliance, a hypothesis could be putorward that rms will comply only when the potential costs o not doing so outweigh the costso doing so, but this hypothesis was not supported by the research. Research conducted by ProjectAlpha has identied that the costs associated with not doing so could include:

9 Project Alpha. (November 2011). Survey Results. Not yet published . London.


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Legal: Deliberate non-compliance is illegal and can result in imprisonment. In the U.K.,or example, ailing to comply with prolieration nancing obligations can result in a prisonsentence o up to 7 years.

Financial: Non-compliant rms regularly ace signicant nes.

Reputational: Being linked to prolieration-related trade, whether legal or otherwise, damagesthe reputation o the company. Te U.S. government maintains a list o denied entities that aresuspected o noncompliance, and such rms can oten neither compete or U.S. governmentcontracts nor import goods or services rom the United States. More generally, many leadingrms also opt not to do business with rms that have been linked to non-compliance orprolieration as part o a risk-management strategy.

Normative: Involvement in prolieration is morally wrong.

Additionally, it should be recognized that there can be costs to the private sector or both complianceand non-compliance. Costs o compliance include stang and resourcing costs associated withrecruiting, training, and paying export compliance proessionals, a less responsive sales orce, and lostsales. Costs o non-compliance can include nes and other nancial penalties.

In the U.K., only 18 rms have been ned and ewer still (eight) have been prosecuted in the lastthree years.10 Tis would appear to suggest that the detection and prosecution rate may have onlya weak deterrent efect, and that other actors drive compliance with normative and reputationalissues dominating.11

Supply Chains and Antiprolieration

Another potential driver or the adoption o antiprolieration practices relates to the supply chain

itsel. Te primary markets or many o the prolieration-sensitive technologies are the deense,nuclear, and aerospace sectors. Tese sectors can thus play a leading role in securing the support otheir supply chains in relation to implementing nonprolieration measures. Firms in these sectorsshould be pressed to implement best-practice compliance systems given the high level o prolierationrisk associated with their products. Such rms should also encourage adherence to these same highstandards in their supply chain.

Extraterritoriality

A nal driver or antiprolieration principles relates to exclusion rom the international marketplace.

In the case o additional measures adopted by the United States, many have an extraterritorialelement, pressuring non-U.S. rms to comply with U.S. law.

10 http://www.bis.gov.uk/policies/export-control-organisation/eco-press-prosecutions and http://www.bis.gov.uk/policies/export-control-organisation/eco-press-prosecutions/compound-penalties11 It should be noted, however, that this analysis is based on a heavily-skewed dataset. Respondents to the surveywere typically compliance ocials employed by large deense and consumer electronics frms.


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U.S. extraterritorial measures are backed by the threat and use o sanctions against entities operatingin third countries that ail to adhere to U.S. controls. Tese include:

Being cut of rom the U.S. nancial system;

Being precluded rom consideration or U.S. government contracts; and

Being listed as a denied entity or the purposes o U.S. trade control measures, where U.S.rms are prohibited rom conducting business with denied entities without a license.

o achieve the efective implementation o a control system, rms may opt to use a range o servicesthat contribute to efectiveness. Tese services can be sourced internally or externally, with the ormerincluding commercial, non-commercial, and government sources. Services that are a prerequisiteto obtaining some desirable public goal are public goods, and authorities should seek to ensure thatpublic goods are available even in the event o a market ailure.


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the roleoF nAtionAl Authorities

Te UN Security Council has become the preeminent rule-making body with regards to preventingillicit trade. Trough Resolution 1540 the Security Council has set out measures that all statesmust implement with regards to nuclear, chemical, and biological weapons and, with 168 countriessubmitting implementation reports, the scope o coverage goes beyond that o the voluntary exportcontrol regimes, such as the Nuclear Suppliers Group. Nonetheless, national authorities mustimplement trade control systems and acilitate compliance, and it is the private sector, at least in ree-market economies, that must render operable the requirements o trade controls.

Current Obligations

Te UN Security Council is the body to which individual national authorities are responsible. TeUNSC requires all states to:

Measure Source

Implement a system o export controls 1540

Enorce export and transshipment controls at the countrysborder

1540

Implement UN sanctions through domestic legislation UN country-specicsanctions resolutions

Engage the private sector 1540

Te passage o 1540 has resulted in the spread o the coverage o national legislation related to exportcontrols, which is a vital prerequisite to increasing resilience to prolieration in additional countries.121540 also calls upon all states to develop appropriate ways to work with and inorm industry andthe public regarding their obligations [with regards to countering prolieration].13

Most national authorities have undertaken to establish a range o voluntary commitments in supporto nonprolieration norms and goals, either as members o export control regimes or as subscribers tothe principles o the export control regimes, which commit the state to:

Incorporate the regimes export control list into national legislation;

Set licensing criteria or certain sensitive goods; and

Share denial notications with partner countries.

National authorities are the lead actors in implementing supply-side controls, and the internationalcommunity holds the governments o each jurisdiction to account or activities that occur within

their territory. Nonetheless, this approach to implementing supply-side controls is based upon twopotential allacies. First, that national authorities can control their private sector; in reality, nationalauthorities can oten only inuence the action o entities operating within their territories. Te

12 Douglas M. Stinnett, Bryan R. Early, Cale Horne and Johannes Karreth, Complying by Denying: ExplainingWhy States Develop Nonprolieration Export Controls, International Studies Perspectives, Vol. 12 No. 3 (August2011), pp. 308-326.13 UN Security Council, Security Council Resolution 1540 (2004)available at: http://www.un.org/Docs/journal/asp/ws.asp?m=S/RES/1540%282004%29


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second potential allacy is that compliance alone can limit prolieration; in reality, even i all rmsremained compliant with the requirements o export control laws and sanctions, prolieration couldcontinue through illicit procurement routes. Tereore, legal compliance with export controls andsanctions should be viewed primarily as a backstop or providing a minimum standard o resilienceagainst prolieration.

Making and Enorcing Rules

Tere are numerous sources o rules that apply across society. In the commercial sphere, the threeprincipal sources are laws adopted by governments and business contracts entered into with otherparties and any internal rules set by the companys management team. Rules may also be enorced bymultiple bodies with most laws enorced by governments, and most contracts enorced through civil(rather than criminal) enorcement mechanisms.

It is oten the case that the rule-making body will also maintain a process to enorce compliance.However, it is also common to nd that commercial or non-governmental organizations enablecompliance through the provision o some orm o service by, or example, setting a standard againstwhich an organizations processes can be tested to demonstrate compliance.

Overall, rules can be set and enorced publically or privately and compliance can be veried viaassurance or inspection.

In the context o export controls and sanctions, the UN is a rule-making body with no efectiveenorcement mandate. Responsibility or administering supply-side controls must instead lie with thelicensing authority. Nonetheless, the concept o partnership implies shared responsibility rather thanexternalization o responsibility rom one body to another. While it is right that government shouldbe the licensing authority, many o the recommendations made in this paper could be implementedeither by the national authority or third parties. For example, training can be delivered by several

parties in line with standards set by governments.

Enabling Implementation

Strategic engagement o the private sector in countering prolieration requires the development opartnerships between governments and businesses. At the practical level such partnerships should besupported by the provision o a range o tools, services, and guidance materials. For example, rmsoperating in sectors afected by trade controls and sanctions must have in place compliance systemsi legal obligations are to be met. Consequently, provision o guidance on compliance can also beconsidered a prerequisite.

Nonetheless, even when a rm has set up a compliance system, it will still need to be supported by

ensuring access to the ollowing:

Compliance Guidance

Supporting Services

Inormation Exchange

Certication/kite marking


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Each o these services is explored in the sections that ollow.

comPliAnce guidAnce

Companies engaging in the trade o strategic goods, or in business that could all within the scope

o multilateral or unilateral sanctions or export controls, should take a systematic approach tocompliance. Systems implemented by private sector entities should both ensure compliance withthe law and prevent prolieration. One way to achieve this goal is to develop systems based on best-practice compliance standards.

Such an approach is necessary not only or exporters and manuacturers, but also or insurance rms,nance rms, shipping rms, and reight orwarding rms. Many rms build upon the guidance otheir national authority. In the U.K., or example, 70 percent o respondents to a survey o Britishrms in 2011 indicated that they implement the BIS export compliance code o practice.10

A particular challenge brought about by the structure o intra-governmental responsibilities isthat in most countries trade compliance is a unction that is oten ragmented and split across

government departments. ypically, the treasury or nance department deals with nancialsanctions while the trade or business department deals with export controls and technologysanctions. Guidance or the private sector promulgated by one department is oten producedin isolation rom the requirements set out by other departments. Another challenge is thatgovernments typically produce guidance on compliance using legal requirements rather thanrequirements based on countering prolieration. As compliance is not sucient to counterprolieration, implementing the guidance alone is oten insucient or preventing the companysproducts or services rom being used in a program o concern.

Recommendations

R3.National authorities should endorse or adopt a best-practice compliance standard

or each aected business sector, and ensure that this standard is linked tocompliance-related training.

R4.National authorities should develop or endorse guidance materials on identiyingillicit procurement (red ag guidance).

Outreach

While ignorance is no excuse or breaking the law, awareness o export control laws cannot beassumed, particularly where controls extend to dual-use and intangible technologies with no obviousWMD application, or enabling services that would otherwise be benign. National authorities

thus have a responsibility to ensure that outreach activities are undertaken on a regular basis. Tisactivity should not be limited to exporting and manuacturing rms and should also ocus on rmsoperating in the nance, insurance, shipping, and ast reight orwarding sectors.

Outreach work conducted by Project Alpha highlights that, where practical, it should be undertakenon a sector-specic basis, with content tailored to suit each business sector. Another lesson is thatoutreach should not ocus solely on export controls but encompass other elements o supply-sidecontrols such as sanctions. It is notable that in many national authorities there are diferent groupsresponsible or implementing export controls and sanctions and, thereore, there is oten a need to


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coordinate outreach in a cross-governmental way. Alphas prolieration bries may provide a templateor sector-specic outreach events.14

Recommendations

R5: National authorities should conduct sector-specic trade compliance outreach

R6: National authorities should develop or endorse a compliance competence rameworkR7: National authorities should develop or endorse sector-specic compliance training

against a compliance competence ramework, taking advantage o E-learning wherepossible and recognizing that the sharing o experience is invaluable

R8: National authorities should develop or endorse a compliance ofcials certicationprogram

Compliance Training

Implementation o compliance in the private sector requires a cadre o trained and experienced

personnel. Creating this cadre requires a structured approach to training. National authoritiesshould acilitate this approach by creating or recognizing a compliance competence rameworkagainst which training can be set and rom which certication exam questions could also be derived.raining can be delivered either by the national authority or by a suitably-qualied ocial in eitherthe public or private sector. Te aim should be or all compliance proessionals to be certied aspractitioners. In Japan, or example, almost 13,000 individuals have been certied in this way.

suPPorting services

Ratings advice

While rms can sel-rate their technology against control lists, this requires trained and experiencedpersonnel that may not be available in every company. Tereore, exporters should have accessto services that can advise them on whether the product or technology is subject to control or isotherwise prolieration-sensitive. Ratings advisory services are ofered at present by both nationalauthorities and by some consultancy services. National authority provision is usually ree, but thisree provision may impede the ull development o market-driven advisory services.

Ratings advice oten has to combine inormation on the goods with inormation on destination orend use, and such services should be able to answer questions both about control status and about

end-use sensitivity. National authorities can also do more to dene the conditions under which tradecould be considered prolieration-related. For example, could the export o structural materials orunderground acilities all within the scope o the controls when the country is known to use suchacilities to house clandestine elements o a nuclear program?

A survey o 52 compliance ocials in British rms in 2011 revealed that 92 percent o rms woulduse the BIS ratings service under certain circumstances, with 14 percent using ratings services to

14 See http://kcl.ac.uk/alpha


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determine the control status (a urther 32 percent use inormation provided via the BIS website).

Recommendations

R9: National authorities should make available a ratings service through whichexporters can check both the control status o their products and whether thetechnologies, even i uncontrolled, could contribute to programs o concern.

R10: National authorities should develop or endorse category listings o goods that,even i uncontrolled, could pose prolieration concerns so that rms can applyadditional vigilance.

R11. National authorities should set out the scope o WMD programs or the purposeso export licensing. (Could the scope include ancillary services in a building used tohouse WMD, or example?)

inFormAtionexchAnge

In addition to the provision o compliance guidance, rms also need to be kept up-to-date onprolieration risks in order to counter illicit procurement. Inormation on the ollowing is essential:

Which countries currently pose a prolieration risk?

What technologies are currently being sought by prolierators?

What entities are currently involved in illicit procurement?

What red ags should rms look or when conducting due diligence?

National authorities may nd it dicult to provide such inormation to the private sector or ear o

causing ofense to another countrys government or compromising valuable intelligence. Solutions tothese challenges include condential briengs to industry and the use o independent, but inormed,third parties.

Te private sector is well-placed to identiy illicit procurement attempts because o its knowledgeboth o the market and o the technology. National authorities must capitalize on this inormationby making it possible or the private sector to share such inormation either with the governmentitsel or with others in the private sector.15

Recommendations

R12: National authorities should create or develop routes through which suspicious

enquiries may be shared.Tere are numerous routes through which suspicious enquires can be collated by thenational authority, including through the licensing authority, through enorcementauthorities, through intelligence services or through independent third parties.

R13: National authorities should provide to their private sector consolidated listso all entities with which trade requires special consideration, including entities

15 Te role o the private sector in sharing such inormation is discussed in the sections that ollow.


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designated by international or unilateral sanctions together with sector-specicguidance on how to ensure compliance.

R14: National authorities should publish export licensing statistics and outcomes.

R15: National authorities should develop or endorse mechanisms through which the

private sector can share suspicious enquiries, tips, and concerns with both nationalauthorities and others in the business sector, using third parties as necessary.

comPliAnce certiFicAtion

rade can aid prolieration in the ollowing circumstances: 1) when the end user is involved withactivities o concern directly, or 2) when the end user will assist an entity involved with activities oconcern, either by re-transerring goods or by providing enabling services. Diferentiating risk in thisway highlights the possible uses o compliance certication. Verication o a businesss credentialsand/or compliance system by a third party could increase the condence that the goods would not beeither misused or diverted provided that:

Driven by a compliance system exporters submit licenses when appropriate and do not attemptto deceive the national authority;

Te party veriying the end users credentials is credible

Te end users country is not o direct prolieration concern;

Te end users country has in place an efective export control system; and

Te end user has in place a compliance system that would prevent the urther export o thegoods without rst reerring to the national authoritys export controls.

A survey o 52 British rms in 2011 revealed that 48 percent o respondents would advocateaccreditation o the companys compliance system i it eased the licensing requirement when

CountryA CountryBCountr A licensin authorit considerations:

LicensingAuthority

Licence

Doesthecountryhaveaprogramofconcern? Doesthecountryposeadiversionrisk?

Company

1Goods

Licensingconsiderations: Doesthecompanyhaveacompliancesystem?

Company

1Licensingconsiderations: Doesthecompanyhaveacompliancesystem?

Border

Arelicencesappliedforwhenrequired? Doesthecompanyverifyenduserundertakings?

Istheendusecredible? Isthedeclaredenduseofconcern?

ontrol

Undertaking

Figure 1. Showing the role o certication in supporting export licensing decisions


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shipping to known customers. A urther 23 percent were motivated by quicker licenses and 15percent i exports to overseas subsidiaries did not require licenses. Moreover, 60 percent o therespondents conduct internal audits o their compliance systems and 21 percent use both internaland external compliance audits.

Te introduction o end user certication o any kind would require both an international agreement

regarding the objectives o such a system and a sustained investment by rms wishing to trade instrategic technologies.

Recommendations

R16: All parties should work collaboratively to develop international standards or tradecompliance.

R17: National authorities should include an optional provision or certication inlicensing assessments and with regards to open licensing.

R18: Firms should encourage business partners to undergo certication when trading inprolieration-sensitive technology or services.

Accreditation o Consultants and Trainers

Market provision o compliance accreditation, training, and outreach is a credible option that can beacilitated by national authorities. Market-based providers o public goods, however, may operate withan explicit or implicit delegated authority rom the national authority, regardless o legal liability, andit may be desirable or providers to be trained to the standards endorsed by the national authority.

Recommendations

R19: National authorities should implement a certication program targeted atcompliance consultancies and training providers. I a national authority does not

itsel intend to carry out accreditation, this responsibility may be delegated to anappropriate independent agency.


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towArd integrAted comPliAnce

Based upon the a recognition that compliance is not sucient to prevent prolieration, this paper hasset out the measures required to prevent the internationally-dispersed private sector rom being usedto sustain prolieration. Te recommendations set out in the paper are neither overly-burdensomenor impractical. Nevertheless, those setting and enorcing controls have an obligation to makeadherence as simple as possible.

Recognizing that economic globalization poses a challenge to the efectiveness o supply-sidecontrols, this section investigates whether another aspect o globalization, namely the availability oever more integrated inormation, can aid nonprolieration eforts.

Inormation Fusion

Spotting illicit trade requires a detailed review o a proposed transaction both against pre-setnonprolieration criteria and the conrmation o the bona fdeso the parties involved. While thenational authority is legally responsible or both, businesses already conduct elements o both as part

o an internal due-diligence process.

When conducting due diligence it is necessary to knowwho wants which goods and why. Guidanceon implementing due diligence is available on the Alpha webpage - kcl.ac.uk/alpha).

Inormation usion allows each o these questions to be addressed automatically or semi-automatically. Data supplied by a potential customer such as a rms name, address, telephonenumber and business sector can be cross-reerenced and veried through web 2.0 services wheninterlinked with inormation held in the deep web, such as telephone and business directories, maps,and business intelligence.

Project Alpha is investigating the use o inormation usion techniques or use in due diligence with

the aim o launching a test application by early 2013. National authorities should embrace suchinnovation: much o the inormation currently required or due diligence is either not made availableby national authorities or is not released in suitable ormats. By making such inormation availablein suitable ormats or anytime, anywhere access by business users, the eciency o compliancerameworks will be greatly enhanced.

Recommendations

R20: National authorities should embrace inormation usion and share licensingreusals or outcomes (including recipient name, country, control entry/type o trade,and grounds or reusal) in a suitable ormat or anytime, anywhere user access.

Partnerships in Practice: Third-party Facilitators

Tis report has highlighted the need or partnerships between national authorities and the privatesector to combat prolieration and it has set out recommendations or specic measures that bothgovernments and rms should implement in order to ensure that illicit trade is prevented. Tis nalsubstantive section o the report explores whether there is a role or third parties in acilitating suchpartnerships by delivering upon the recommendations set out elsewhere in this report.

As export licensing decisions must take account o both a states oreign policy priorities and sensitive


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inormation on potential end uses, they are, rightly, available only to governments. Tereore,national authorities must continue to be the ultimate competent authority to issue licenses or theexport o military and dual use technologies.

But there is a range o services associated with the export licensing process that could beimplemented either by the national authority or by competent designated entities operating under

the accreditation o the national authority. Tese services are outlined in the table below, wherecurrent / possible service providers are also identied.

Governmentprovision(U.K.)

Marketprovision

Private-sectorsel-provision

PossibleNGO-provision?

Comment

Licensing decisions All None None None Sole competence o national authority

echnical ratings Most Some Some Yes Only government has legal authority

Exportability meetings Rarely undertaken

Nil Nil Yes Constrained by resources

End-use verication None None None Yes Constrained by resources

Development o compliancesystems

Ni Few Most Yes No set standards

Compliance auditing (and accessto discretionary licensing)

All Some Some Yes No systematic approach other than or accessto discretionary licensing

Compliance accreditation /kite-marking

None None None Yes No standards set

raining / outreach Some Some Some Yes Several providers, but no standards

Accreditation o consultants andtrainers

None None None Yes No standards set

In addition to consultancies and other commercially-driven suppliers o compliance-related services,there are two notable examples o projects that could be considered as third-party acilitators:CISEC in Japan and Project Alpha in the U.K. While both were established to engage theprivate sector in countering prolieration, they are unded diferently; Project Alpha is unded by

government whereas CISEC is unded by contributions rom its members. Both o these projectsare described below.

Te CISEC and Project Alpha case studies demonstrate that there is a credible role or third partiesin acilitating the implementation o nonprolieration in the private sector. In particular, suchorganizations have the reedom to conduct activities that governments cannot: be it highlighting theprolieration risks posed by certain countries or representing the views o participating companies inrelation to trade control issues.


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centerFor inFormAtionon security trAde control (cistec)

CISEC was created in 1989 as a non-prot, non-governmental organisation to work with the private sector inimplementing export controls. CISEC has evolved to become a champion and partner or industry, but thishas corresponded with a decrease in closeness to government. Te organization has an annual budget o $6m peryear which is entirely covered by industries contributions. Tis budget covers a staf o around 40 people, ofers aull suite o ancillary services or export licensing, including ratings, training, certication, and consultancy.

CISECs establishment was driven by the recognized need to develop a compliance culture in Japaneseindustry ollowing the oshiba export o machine tools Russia, tools that subsequently were used to improveRussias submarine propeller production capabilities. Te organisation was originally heavily stafed bygovernment (MEI) personnel, and grew to be unded almost entirely be industry.

CISEC has two primary roles: 1) promote export compliance, and 2) representing industry

1. Promoting export compliance

o Individual consultations, including on control status and similar

o Compliance programs, including maintain guidance and advising individual rms on itsimplementation

o Seminars, training, etco Publication o goods control status at companys behest.

o Other knowledge transer services, such as journal publications, articles on current issuesetc.

Te organization has no ocial status as a provider o export licensing inormation, and advice given byCISEC could, in theory at least, difer rom that given by MEI.

CISEC ocuses solely on strategic export controls or dual-use goods, but this role may expand to covermilitary goods ollowing the decision by the Japanese government to allow military-related exports.

2. Representing industry

o Seek harmonization o export controls worldwide and promoting Japanese rms exportinterests to MEI and the international community.

As a not-or-prot organisation, CISEC is also able to conduct outreach activities both within Japan andinternationally to spread best practice and promote CISECs values. Tis includes holding regional exportcompliance workshops and conducting outreach to SMEs within Japan.

Membership: With around 370 member-companies, CISEC representatives claim their membershipincludes all major Japanese exporters o dual-use technologies. Nonetheless, one identied challenge oCISEC is to engage SMEs, suggesting that coverage is not complete. Expansion o SME membership wouldlikely result in an increased use o CISECs services, however, as the current membership, which consistsmainly o large rms with well-established compliance system, rarely need to consult with CISEC.

CISEC is also working to expand its relationships with academia and SMEs. While university membership oCISEC has expanded in recent years, it is not yet clear what universities desire or will gain rom membership.

Seminar series: 34 seminars per year (25 general export compliance seminars per year, 9 events on laws and

regulations)Proessionals training and certication program: 12,483 holders o associate status, 147 o legal expertstatus, and 285 o expert status.

Relationship with Government: MEI, the Japanese equivalent o BIS, continues to have an export controlsstaf o around 80 people and collectively process some 18,000 licences. CISEC holds no ocial positionin the Japanese compliance system, but does provide a orum through which to government and industry canshare views and inormation on export controls


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conclusion

National authorities are responsible to the international community or implementing export controlsand sanctions, and they must adopt measures and enorce laws to do so. While oten overlooked,it is the private sector that must make operable the requirements o export controls and sanctions.o enable the private sector to do this, national authorities should make a range o inormation andservices available, in the absence o which the private sector cannot reasonably be expected to comply.

National authorities should:

1. Facilitate the development o partnerships with the private sector;

2. Set out or the insurance, exporting, nance, and insurance industries what measuresshould be implemented in order to counter prolieration, including dening the scope oWMD programs as relevant or the industry sector.;

3. Endorse or adopt best-practice compliance standards or each aected business sector,and to ensure that it links to compliance-related training;

4. Develop or endorse guidance materials on identiying illicit procurement (red-ag guidance);

5. Conduct sector-specic trade compliance outreach;

Project AlPhA

Project Alpha was created in 2011 in the Centre or Science and Security Studies o Kings College Londonor the purpose o proactively engaging the private sector in countering prolieration. Te project worksto improve and inorm implementation o export compliance in individual rms and to make supply

chains more resilient to illicit trade. Te project acts as an independent third party acilitator, providinga route through which rms can be inormed about prolieration risks and compliance requirements andthrough which the governments can access inormation rom the private sector on suspicious enquires andtechnologies. Te project is unded by the British government but operates independently.

Guidance Materials & raining: Project Alpha works to provide inormation on countering prolierationto industry. Tis is achieved through the projects website (kcl.ac.uk/alpha), which contains complianceguidance, prolieration bries, country bries, and other materials. Te project also runs sector-speciccompliance seminars or those sectors that can be afected by trade controls.

Partners Against Prolieration: Project Alpha launched a Partners Against Prolieration initiative insummer 2012 through which rms undertake to implement compliance systems that could counterprolieration risk. Firms receive a range o benets or doing so, including the support o the Project Alpha

project team, training, and access to certain tools. Te main benet or rms, however, is the ability todemonstrate to pontical customers and suppliers that they take compliance responsibilities seriously; thisis particularly important or the manuacturers o high-tech materials and equipment, which oten wish tosupply these technologies to the deense, aerospace, or government sectors.

Project Alpha Screening System: Looking to the uture, Project Alpha is developing a system that will allowrms to screen potential customers or prolieration concerns. Current commercially-available systems areavailable to screen entities against the various designated entity lists, but the costs o accessing these systemscan be prohibitive. o encourage use, the PASS system will be available or ree.


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6. Develop or endorse a compliance competence ramework;

7. Develop or endorse sector-specic compliance training against a compliance competenceramework, taking advantage or E-learning where possible and recognizing that thesharing o experience is invaluable;

8. Develop or endorse a compliance ofcials certication program;

9. Make available a ratings service through which exporters can check both the control statuso their products and whether the technologies, even i uncontrolled, could contribute toprograms o concern;

10. Develop or endorse category listings o goods that, even i uncontrolled, could poseprolieration concerns so that rms can apply additional vigilance;

11. Set out the scope o WMD programs or the purposes o export licensing (could the scopeinclude ancillary services in a building used to house WMD, or example?);

12. Create or develop routes through which suspicious enquiries may be shared;

13. Provide to the private sector consolidated lists o all entities with which trade requiresspecial consideration, including entities designated by international or unilateralsanctions together with sector-specic guidance on how to ensure compliance;

14. Publish export licensing statistics and outcomes;

15. Develop or endorse mechanisms through which the private sector can share suspiciousenquiries, tips, and concerns with both national authorities and others in the businesssector, using third parties as necessary;

16. Support the development o international standards or trade compliance;

17. Include an optional provision or certication in licensing assessments and with regardsto open licensing;

18. Encourage business partners to undergo certication when trading in prolieration-sensitive technology or services

19. Implement a certication program targeted at compliance consultants and trainers.

20. Embrace inormation usion and share licensing reusals or outcomes (includingrecipient name, country, control entry/type o trade, and grounds or reusal) in asuitable ormat; and

21. Facilitate the creation o third-party acilitators to convey prolieration risks to takeorward the partnership model espoused in this paper.

Te private sector also has a role to play in countering prolieration that goes beyond compliance withthe law. Te necessary measures are summarized in Appendix 1. For a variety o reasons, it can beexpected that rms will adopt many o these anti-prolieration measures, but national authorities orthird parties have a role to play in promoting the adoption and setting o best practices.


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APPendix: PArtners AgAinst ProliFerAtion

Project Alpha

Partners Against Proliferation

[email protected]

kcl.ac.uk/alpha

Project Alpha is a government-sponsored project that works to assist the private sector in implementing tradecontrols and in avoiding involvement with prolieration-related trade. Firms should also reer to ProjectAlphas website where sector-specifc guidance on implementing export compliance measures can be ound.Te website also contains the latest inormation on illicit procurement attempts to aid frms in implementingthe measures detailed above.

Background: Te private sector has an important role to play in preventing illicit trade in technologies

or services that are used to sustain Weapons o Mass Destruction programs in countries. Firms areobliged to comply with the laws o the territories in which they operate laws that include therequirements o UN Security Council Sanctions imposed on countries such as Iran. But given theillicit routes through which countries like Iran circumvent sanctions to acquire technology and servicesrom the international marketplace, manuacturers, exporters, insurance, nance and shipping rmsshould take extra measures to ensure they do not inadvertently aid sanctions-busting activity.

Partners Against Prolieration: Partners o Project Alpha are those rms that work to counter prolierationby implementing best-practice trade compliance systems. Partners are asked to assist in steering ProjectAlpha via the Industry Steering Board, which meets quarterly. Partners undertake to implement themeasures that ollow and to actively encourage those in their supply chain to do the same.

Partners will: Maintain a trade compliance system that initiates appropriate action when:

o Te technology to be exported is controlled;

o Te exporter knows, suspects, or has been inormed that the export is destined or aWMD program; or

o A party to the export is a designated entity.

Partners undertake to:

Implement a compliance system based on sector-specic best practices that is integrated withthe companys Corporate Social Responsibility ramework;

Ensure that key business partners, including distributors, subsidiaries, and agents, implementbest-practice compliance systems;

Conduct background checks on customers using open source material and terminate businessdeals with entities o prolieration concern;


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Develop and implement corporate monitoring and detection systems to identiy illicitprocurement attempts or prolieration-sensitive goods;

Share suspicious enquires and counter actions with government agencies and the privatesector (through Project Alpha, i necessary);

Emphasize adherence to non-prolieration with business partners and through the rmswebsite;

rain all relevant staf against a trade compliance competence ramework;

Implement measures to protect the intangible technology (such as design inormation)associated with prolieration-sensitive goods or processes.

Firms should also reer to Project Alphas website where sector-specic guidance on implementingexport compliance can be ound. Te website also contains the latest inormation on illicitprocurement attempts to aid rms in implementing the measures detailed above.

About Project Alpha

Project Alpha at Kings College London acts to build supply chains that are resilient to proliera-tion. Alpha provides inormation, guidance, and training on prolieration and export controlsissues or industry. Alpha recently launched a Partners Against Prolieration initiative in whichProject Alpha helps frms adopt the measures set out in the appendix. Interested parties can fndout more about Project Alpha by visiting the projects webpage: www.kcl.ac.uk/alpha


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About the Project on Managing the Atom

Te Project on Managing the Atom (MA) is the Harvard Kennedy Schools principal research group on nuclearpolicy issues. Established in 1996, the purpose o the MA project is to provide leadership in advancing policy-relevant ideas and analysis or reducing the risks rom nuclear and radiological terrorism; stopping nuclearprolieration and reducing nuclear arsenals; lowering the barriers to sae, secure, and peaceul nuclear-energyuse; and addressing the connections among these problems. Trough its ellows program, the MA project alsohelps to prepare the next generation o leaders or work on nuclear policy problems. Te MA project providesits research, analysis, and commentary to policy makers, scholars, journalists, and the public.

Project on Managing the Atom

Beler Center or Science and International AairsHarvard Kennedy School79 JFK Street; Mailbox 134Cambridge, MA 02138Phone: 617-495-4219E-mail: [email protected]

Website: http://managingtheatom.org


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Project on Managing the AtomBeler Center or Science and International AairsHarvard Kennedy School79 JFK Street; Malbox 134Cambridge, MA 02138Phone: 617-495-4219Email: [email protected]: http://managingtheatom.org

Copyright 2012 President and Fellows o Harvard College

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