§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Neubert.]3.12 pm
§ Mr. Paddy Ashdown (Yeovil)
From bananas to microelectronics—some may think that that is going from the sublime to the "cor blimey".
I am grateful for the opportunity of raising in this Adjournment debate the problems of British high technology exporters, especially the case of Mr. Michael Hambly, and I thank the Minister for being here at this late hour on a Friday afternoon.
Mr. Hambly runs a small export company dealing in small computer products for export to Europe and the middle east. He tells me that for the past 18 months he has suffered from increased difficulty with the Department of Trade and Industry and opposition from Customs and Excise, which, as he said in a recent letter to me,seem intent on enforcing the loosest possible regulations in the tightest possible way.Mr. Hambly's experiences are not unique by any means. Judging from similar complaints that I have received from high technology exporters they are typical of the confusion that now reigns over high technology exports from Britain.
It might be instructive to the House if I read verbatim, and in the original pungent form, extracts from a letter of 31 May from Mr. Hambly relating his experiences in trying to get out of Britain a recent order for Belgium. He said:When I telephoned your Office last week it was as a result of massive frustration. We had the previous week shipped via a company called Salters (UK) Ltd. to Belgium 20 video monitors and 8 disk drives manufactured by Commodore Business Machines. We had checked by telephone with the Department of Trade & Industry that as far as they were concerned these goods did not need an export licence. Normally in a case like this I would apply for an export licence anyway since I find it always the safest way but bearing in mind that licences take normally two weeks to obtain and that my Belgium customer was desperate and needed the goods to complete an order, we shipped the product without.Some days later we received a call from Salters who told us that the goods had been impounded by Customs who insisted that the monitors needed an export licence. Apparently at this stage another problem arose which at the time I was not aware of. Our Belgium customer had engaged the carriers and at the time had told them that he wanted them to collect a number of monitors. When we received his actual order he had in fact added, as he often does, other items; in this case 8 disk drives. We had packed the product up in plain brown boxes marked computer parts…(this is normal practice since boxes marked 'home computers' tend to get lost in shipping) but had filled the invoice out describing the products accurately. Salters (UK) had, however, mistakenly assumed that all boxes contained monitors and had filled their shipping documents out to read 28 monitors.I telephoned the Customs officials at Ramsgate and had a lengthy conversation during which they insisted that the monitors required an export licence. They advised me I should contact the DTI.…This I did. After some discussion with him he agreed that the monitors were in fact not licensable and that I should pass this information to Customs and if there was any problem they were to telephone him. I telephoned Customs back with this information but at this point they informed me that they had opened all the packages and discovered the 8 disk drives undeclared on Salters original paperwork. I explained that was a simple mistake and described how I thought it had happened. I also pointed out that all of our invoices with the documents contained an accurate description of the boxes and no attempt had been made to hide anything. They…insisted that I should now speak to the DTI and get a ruling on the disk drives. By this time I had wasted almost a whole day on the telephone. I telephoned back to the DTI…who agreed that the legislation was 1446 extremely vague and admitted to me that almost anything electrical could be classified as a computer product under the existing legislation. He advised me that in his opinion the disk drives were licensable and that I should apply for an export licence for them and that this would be forthcoming and that he foresaw no problems. I telephoned export licensing and asked them how quickly they could arrange the export licence for me. The young lady there was extremely helpful but then warned me that Customs were still likely to impound the goods if we only applied for a licence for the disk drives. She then pointed out that if I wished to have a licence for the monitors as well, suggesting it would be safer bearing in mind that no-one seemed 10 know exactly what was licensable and what was not, that I would also require a Certificate of Declaration from my Belgian importer. This was, of course, impossible given that the goods were already late in shipment and that a declaration would take at least 5/6 days to organise. I would then have to send this to the DTI and so on. In the end I decided after another telephone call to Mike Roach at the DTI that we would only license the disk drives. All the paperwork was completed and despatched that day.It was in the middle of this mess that I telepohoned your office. What I haven't described since it would take a number of pages was the number of fruitless telephone calls I made to various faceless telephone voices who were neither interested in helping or interested in telling me where I could obtain help. I felt I was going around in circles. I do not blame the individuals; they are only the cogs in an enormous machine but one thing is certain; the machine is out of control.…In the meantime the goods would be held and no shipment would take place. It is now almost 3 weeks since my Belgium customer's original order and I feel certain I have lost his business for good. He was a regular customer purchasing between £5000 and £15000 worth of equipment per month. Not a lot perhaps by many people's standards but for a small export company like our own an important part of our turnover. I spend all yesterday afternoon until 5.30 pm trying to get sense from various Customs & Excise officers but to no avail; I couldn't even discover to where the documents had been sent. No-one seemed to know or care. This morning I started my telephone calls at 10 am and by 10.30 am had got through to … General Customs B Branch 3.A. She listened patiently and was polite but as with all the others told me there was nothing she could do and again could not tell me where the documents might be.…However…she went away to get a telephone number for me and on returning informed me that she had discovered the documents had arrived that morning and were with one of her colleagues. MIRACULOUS. I then spent a frustrating 15 minutes trying to find out what would happen to the goods. She explained to me that a Customs officer at Ramsgate had decided that a misdemeanour may have taken place and had written a report to pass on to his superior for appraisal and recommending that the goods be impounded. His superior had read the report, added his own comments and recommended that the goods be impounded and had passed it to his superior for comment. His superior had read the report, added his comments, recommended the goods be impounded and posted it to the Department. She explained that she would now read the report, add her comments and pass it to her superior. She, also, explained that she had no authority to make any decision. I asked her what would happen once the report had been passed to her superior. To my absolute amazement she replied he will pass it to his superior with his recommendations and there I discovered it would finally stop. If this is not bureaucracy gone absolutely crazy I do not know what is.A final note on this saga, after pleading with the lady at customs and Excise to try and sort something out she kindly returned my telephone call a little later and told me that her superior had given permission to release the monitors"—which the DTI said originally would not require licences—but not the disk drives. I must say that this would not have taken place had I not made such a fuss and told them I intended writing to you and to anyone else I felt could help…Virtually every person I have spoken to in a Government department over the last 2 weeks has expressed some disquiet and dissatisfaction with the way the present rules work. It is obvious that the legislation is unwieldy, out of date and virtually unworkable in any sensible fashion…The frustration that I and many other exporters feel is growing daily. Something needs to be done and it needs to be done quickly. Technology marches much faster than the minds of bureaucrats.1447 I sent that letter to the Minister and, in reply, he conceded that there was, to use his words,uncertainty about the export licensing position".As an understatement, that is masterful. He said however, that this situation might be resolved once the United Kingdom had got agreement on the new COCOM arrangements governing high technology exports. Indeed, according to a parliamentary answer given to the hon. Member for Nottingham, South (Mr. Brandon-Bravo) last Friday, commenting on the new COCOM agreement, the Minister said that COCOM had now reached an agreement which was "satisfactory" to British interests.
I should now like to consider the details of the Minister's answer to the hon. Member for Nottingham, South, as it is clear that, far from being in the Minister's words "satisfactory", that answer was, at best, incomplete and, at worst, downright misleading.
In his answer, the Minister said that the COCOM arrangementswill require the formal assent in due course of the Governments concerned: This is expected in the autumn of this year. I hope shortly to make the necessary statutory instrument".I understand, and I ask the Minister to confirm, that the new COCOM lists have the force of law, not in the autumn, but since 12 July under section 1 of Import, Export and Customs Powers (Defence) Act 1939, which is normally known as the Emergency Powers Act. What is true, however, is that the lists will not be published, or even publicly available until the autumn. I am also informed that those arrangements do not require parliamentary approval, as the Minister seems to imply but can be put into force on the signature of a senior civil servant.
The Minister's answer continues:When the new arrangements are in force, low-powered computers of no strategic significance will be freed from export control".This is simply not accurate. In fact, and I ask the Minister to confirm this. The United States has retained the de facto right to veto exports of any computer which has either networking facility, software development tools or virtual memory facility. That veto will, in fact, allow the imposition of controls on exports to all destinations on machines as simple and primitive as the Apple 2 and the ZX Spectrum — a far cry indeed from the Minister's comfortable assurances that low-powered personal computers will not be affected. In many ways we are back to the circumstances that applied before the COCOM arrangements. I understand, and again I ask the Minister to confirm, that in addition to these clawback provisions, the United States also refused to give assurances that it would not continue to use the extra-territorial provisions of the United States Export Administration Act, whenever United States designs or parts of designs, chips or parts of chips, or any other components or parts of components were incorporated. Since, as the Minister will know better than most, the high technology industry is highly international and almost all low-level United Kingdom produced goods contain such American produced items, all such items could still be subject to American blocks on export.
The Minister went on to say in his answer:Certain strategic categories of software…will be brought under export control.1448 What he meant was that, in effect, almost all software exports made to any destination — and I mean any destination, including Belgium — could fall under the control provisions. I am informed that the definitions, which depend on a data processing rate of 15, of affected software are so loose that about 100,000 items of software could be licensable for export even to friendly European countries. I understand that the Minister's officials have frankly no idea either of how to define the software to which these provisions refer, or to control its export. How, for instance, will he enforce the control of export of software down telephone lines to other countries? We can envisage ordinary cassettes that contain low-level software being held up in customs, much as Mr. Hambly's VDUs were. Software relating, for example, to CADCAM facilities, in which Britain is a world leader, could be blocked. So could all software relating to artificial intelligence systems. Incidentally, a lot of artificial intelligence software in Britain is imported from Hungary, one of the very countries which we are trying to exclude from getting their hands on this technology. Nothing more clearly shows the ludicrous nature of the agreement that we have reached.
The Minister also said:stored programme controlled telecommunications equipment…will be brought under export control".—[Official Report, 20 July 1984; Vol. 64, c. 371.]Since stored programme facility includes the re-dial facility incorporated into even the most simple modern telephone handsets, what the Minister means is that the United States could use the COCOM agreement to insist on licensing procedures for almost all British Telecommunications equipment—right down to simple telephones—being exported to any country, including friendly and European countries.
Mr. Hambly's letter shows that utter confusion reigns over the procedures for exporting high technology and that the Customs and Excise and the Minister's own officials are as confused as everyone else. The new COCOM agreements are likely to compound confusion even further. At best, Customs and Excise and the Minister's officials will find them unworkable and will ignore them. At worst, the agreements will constitute a block on high technology exports from Britain, which will allow other nations, with more powerful industries and more strenuous Governments to support them, to move into our markets and clean up.
I ask the Minister for clear and detailed indications of what he will do to put right this mess. I also ask that the new COCOM arrangements should, in the light of their potentially damaging impact on Britain, be brought to the House for debate and approval early in the new Session.
§ The Minister for Trade (Mr. Paul Channon)
The hon. Member for Yeovil (Mr. Ashdown) has secured another Adjournment debate on export controls. I know that the operation of security export controls and, in particular, their effect on small companies seeking to develop their export trade are matters in which he takes a keen interest.
The hon. Gentleman asked for the debate to deal with the case of Mr. M. L. Hambly, and he raised some wider issues. I shall be able to answer some of those points, and I shall get in touch with the hon. Gentleman about the matters that I cannot deal with today. It might be 1449 appropriate to have a debate some time on the general issue, rather than to raise it as a side wind to the case of an unfortunate individual. The issues are important and need public debate, though not necessarily in the House.
I do not accept what the hon. Gentleman said about the future operation of COCOM. The new arrangements will be a great improvement. I hope to have time to say a few words about them, preferably today, but, if not, on another occasion.
I am grateful to the hon. Gentleman for having written to me in advance about Mr. Hambly's difficulties and giving me notice of his intention to seek the debate.
I should start with a few general points. The Government are anxious that the export licensing controls should operate as smoothly and with as little hindrance to trade as possible. Obviously, we have to achieve the purposes that lie behind the controls. Controls are necessary on exports of goods of strategic important significance, including computer equipment. That is not in dispute.
Perhaps I do not need to go into detail about the background to the controls, which I explained to the hon. Gentleman in a similar debate in April. Virtually the whole House accepts that controls are essential to ensure that the countries of the Western Alliance maintain their vital lead over the Soviet Union and its allies in strategic high technology equipment and know-how.
The Government realise the need for the lists of goods subject to control to be restricted to items of genuine strategic concern. That has been our objective in the recent review by COCOM member states of the lists of embargoed goods.
Since there is general agreement on the need for controls, we must apply them as fairly and efficiently as possible. That involves officials in my Department responsible for administering the export controls and Customs officials whose job is to enforce them at the ports. They operate under specific legal provisions — the Export of Goods (Control) Order 1981 and the Customs and Excise Management Act 1979. The order lists in a schedule the goods that are subject to control, and the Customs Act provides for controlling their actual export.
The Export of Goods (Control) Order is the legal authority on whether particular goods need a licence, and the onus of complying with the law rests ultimately, of course, on the exporter. I accept that descriptions of controlled goods are often detailed and need expert interpretation. The reason is that, by being as specific as possible, they help to ensure that items are not caught unnecessarily.
The export licensing staff in my Department are happy to give advice in individual cases, but from time to time they have to refer, if necessary, to technical experts elsewhere in the Department, especially the information technology division if we are dealing with electronic and communications equipment. Customs officials also have access to that advice. Indeed, we shall strengthen those resources so that advice can be given more fully to those who need this advisory service.
I understand Mr. Hambly's frustration and the reason which has led the hon. Gentleman to raise the case. I have to point out, however, that Mr. Hambly's problem is largely due to the unfortunate failure of his shipping agents to realise that the consignment in question, about which there has been all this excitement, included disk drives as well as video monitors. As a result, the contents of his 1450 consignment were inaccurately described in the Customs documents. The video monitors in question are not subject to export licensing control, but the disk drives are.
The hon. Gentleman said that officials somehow appeared confused about the scope of the controls. My inquiries do not lead me to that conclusion. I think there may have been some misunderstanding in what was a rather confused situation. The staff in the export licensing branch know full well that disk drives need a licence, because they regularly deal with applications involving them, and I cannot believe that they would have advised otherwise. A member of the information technology division confirmed later to Mr. Hambly that disk drives were licensable. Mr. Hambly applied for a licence on 16 May and received it on 23 May—within five working days—so I must refute what the hon. Gentleman said about two weeks.
§ Mr. Ashdown
The Minister should recognise that the Customs and Excise stopped the consignment when they thought it was VDUs alone.
§ Mr. Channon
I shall come to that in a moment.
In such cases we normally require an international import certificate issued by the authorities of the importing country — in this case Belgium — before issuing the licence. That requirement was waived because of the low value of the consignment. There may have been some misunderstanding about the precise licensing position, which can arise when there are large volumes of telephone inquiries and the precise details of the proposed export are not to hand.
In the case to which the hon. Gentleman refers, on 15 May a form C273 export declaration and a Community transport document, form T2, were presented to Customs by Salters Freight UK Limited on behalf of Mr. Hambly's company, Computer Supermarket Holding Limited, for clearance of goods destined for Belgium. Form C273 described the goods as 22 packages of computer modules and form T2 described them as 22 packages of computer monitors.
The Customs officers called for invoices to clarify the export licensing position. Those revealed that the consignment contained computer disk drives in addition to the monitors. The forms were inaccurate. Then the Customs consulted the technical adviser at the Department of Trade and Industry, and he advised that, although the monitors did not require an export licence, the disk drives did, as they always do. So, in view of an apparently false declaration as to the nature of the goods—which is an offence under section 68 of the Customs and Excise Management Act 1979 — the goods were accordingly detained. That would seem to be perfectly natural to me.
On 26 May, the export licence for the disk drives and revised declarations were presented to Customs and the matter was reported to the headquarters of Customs for direction. The monitors were released on 31 May, but the disk drives continued to be detained while consideration was given to the seriousness of the company's action in attempting to export the goods without a licence and making a false declaration.
At Mr. Hambly's request, the disk drives were released on 13 June against a deposit of £200 until it could be decided what action, if any, was to be taken against the company. The Customs have now decided that action will be confined to sending a warning letter to the company 1451 —there will be no prosecution—and a warning letter to the agents who presented the documentation and goods, and the £200 deposit will be returned.
Whatever may be the merits of the controls or the regulations which enforce them, it must remain the responsibility of Customs and Excise to enforce the law as it stands. I do not think that, in the circumstances of this case, the Customs could have done other than take the action that was taken, and a warning has been, or is about to be, sent to the company concerned. I hope that there will be no more false declarations in future and no more difficulties of that kind.
The hon. Gentleman is right on the wider issues—about the COCOM list and the need to update it—although I disagree with his interpretation. We have been trying to focus attention on goods that are strategically sensitive in terms of present-day technology and to prune the COCOM list of items which may have been sensitive in the past but which are now available in substantial quantities to the Soviet Union and its allies, and we have tried to take account of the rapid developments in computers.
Earlier this month, member states of COCOM reached agreement in principle on future export controls on computers, computer software and telecommunications switching equipment. The agreement concludes satisfactorily the COCOM review of the list of goods, the export of which is controlled for strategic reasons.
Once the arrangement has received the formal assent of the Governments concerned, which is expected in the autumn, I shall be in a position to implement the new controls in United Kingdom law. When these are enforced, low-powered computers of no strategic significance will be freed from export control and there will be substantial flexibility in the arrangements for controlling computers and related equipment of higher levels of performance.
§ Mr. Ashdown
I may have said certain things which took the Minister by surprise. He is almost reading out the press release to which I referred in my speech. I am interested in his remarks, but I should be grateful if he would answer the points that I made. Perhaps he would do that by letter, in view of the limited time available today.
§ Mr. Channon
I shall write to the hon. Gentleman, though I hope to answer now some of the points he made.
The law has not been changed with effect from 12 July; but it will be, once the final arrangements have been agreed in Paris. It will be done by way of statutory instrument in the normal way, signed by officials, as is the custom with many statutory instruments.
As for restrictions on minor telecommunications switching equipment, there are problems over the export of software. For that reason we have been at pains to get the controls confined to strategically sensitive software. The hon. Gentleman exaggerated the scope of the new controls on lower-powered computers, but I shall write to him in greater detail, because it is a technical matter and I would not wish to mislead him or the House. It is untrue 1452 to say that all low-powered computers will be blocked. Nor will all software be blocked. Only software of strategic significance will be affected.
Earlier this year I wrote to the hon. Gentleman about Mr. Hambly's case. I agreed that what was said about computers in the current export order might not be sufficiently precise. I confirmed that although all disk drives were subject to licensing control, they were not specifically mentioned in the order because they fell within the description relating to certain specialised parts.
As a result of the recent agreement in COCOM, floppy disk and cartridge tape drives at the lower levels of performance will in future be free from export control. These exceptions will be set out in the new order which will be made to implement the results of the list review. All hard disk drives will continue to need an export licence.
I hope that the hon. Gentleman will agree that I have shown that Mr. Hambly's unhappy experiences were due to unfortunate misunderstandings of the export control arrangements. Those misunderstandings were based in part on the fact that the existing arrangements, as I fully acknowledge, are out of date. However, as I am sure the hon. Gentleman will recognise, to make changes in the COCOM regulations there must be unanimity and no Government can introduce a change without obtaining the unanimous agreement of its partners. That is what we have been striving to do in the recent COCOM talks.
I have looked at the answer that I gave recently and I hope that it was not inaccurate. If the hon. Gentleman thinks that a particular point was inaccurate, I should be glad to pursue it. It was generally thought by most people that the outcome of the negotiations represented a considerable success for the United Kingdom. I have not yet had the opportunity to do this, but I now place on public record my belief that the officials in the Department of Trade and Industry and their colleagues conducted the negotiations with extreme skill and deserve commendation not only from the Government and the House but from the industry on whose behalf they were trying to wage a battle to get rid of some of the unnecessary restrictions.
I hope and believe that the new arrangements will obviate the difficulties that someone such as Mr. Hambly has suffered. We have no wish to do down Mr. Hambly; we sympathise with those caught in a difficult position. However, with respect to Mr. Hambly, he might have handled the matter differently at certain stages of the sad story.
We shall do anything that we can to guide Mr. Hambly and many others in his position through the existing legal requirements. We accept that it is difficult for small business men, some of whom are not expert in these complicated and difficult matters. Indeed, when asked to explain the regulations in detail, we are dealing with a moving target and it is important to give an accurate answer—
§ The Question having been proposed after half-past Two o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at eighteen minutes to Four o'clock.