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The Strengths and Weaknesses of Export Control Laws and Regulations

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The Strengths and Weaknesses
of National Export Control Regulations and Laws

[Emis Procurement] [Practice of Suppliers] [Weak Coordination Within Governments]

To obtain desired items, proliferant states have exploited weaknesses in export control laws and regulations or have deliberately sought suppliers in countries with weaker export control laws or enforcement practices. In addition, potential suppliers have aided proliferants by seeking loopholes in their own export control laws.

In the 1980s, West German and Swiss companies were often approached for sensitive items because the government had a weak export control system. Export control officials often accepted an end-use declaration on an application at face value, enabling companies to easily deceive the authorities about the true destination and purpose of their exports. Because of a lack of resources and a culture that supported exports, the German export agency offered little real oversight of exports. Following a series of scandals in the late 1980s and early 1990s, Germany and Switzerland tightened their export control practices severely. This tightening resulted in much greater scrutiny of export control applications. According to Michael Rietz, a German lawyer, in 1988 about 85 employees at the export control office of the German government processed 100,000 export applications. A few years later, with strengthened laws and more resources, the same office had a staff fourfold larger and processed only 25,000 export applications a year.

As exports have been tightened in a particular country or region, proliferant states have looked to other areas for suppliers or companies that can transship a sensitive item. These proliferant states are often in a race with those tightening export controls.

EMIS Procurement

Export controls factored into Iraq's decision in 1981 to pursue the old electromagnetic separation (EMIS) technology to make highly enriched uranium for nuclear weapons. Iraqi officials realized that the main pieces of equipment and computational software for this technology were not on suppliers' nuclear export control lists and thus could be procured relatively easily.

In 1991, when the Persian Gulf War halted Iraq's nuclear weapons program, the EMIS program had secretly obtained a wide variety of know-how, test equipment, EMIS components, machine tools, large presses, welding equipment, furnaces, water purification equipment, electrical gear, and chemical equipment for processing uranium.

Iraq accomplished this massive amount of procurement without revealing its program to the suppliers or Western intelligence agencies. The extent of the EMIS program was not uncovered until after the start of the intrusive inspections mandated by U.N. Security Council in April 1991.

Critical to Iraq's success in keeping its EMIS program secret was its careful efforts to procure items overseas without revealing their purpose to the supplier. The lack of national export controls on EMIS items and ineffective verification of end-users helped ensure Iraq's success. For more information click here.

Practice of Suppliers

Exporters have sought to use broad interpretations of export control laws to create loopholes. Their efforts have been helped by consultants and lawyers who are critical of export controls.

In the 1980s, for example, West Germany's export law did not have a legal definition of a machine "specially designed" for use in producing weapons, munitions, and arms-related materials. Thus, H+H Metalform officials and consultants argued that the theoretical possible use of one of their flow-forming machines in the civilian realm justified classifying the machine as "dual-use" and not specially designed for its actual intended military purpose. At the time in Germany, dual-use items were weakly controlled and often could be exported without an export license.

This interpretation was promoted extensively by Dr. Guenter Welzien, who had retired in 1985 from the Federal Office for Trade and Industry (BAW), now the Federal Export Office (BAFA) in Eschborn. After retirement, he became a consultant to various firms, including H+H Metalform. After hiring Welzien, H+H became significantly more successful in obtaining positive rulings for its dual-use exports.

Welzien, according to trial statements during the trial of H+H managers in the early 1990s, helped H+H navigate the export control process in other ways as well. In the mid-1980s, H+H wanted to sell a flow-forming machine to the Russian company Standopress. H+H stated the end-use as manufacturing train brake cylinders and hydraulic and pneumatic cylinders. The suspected use was the production of rocket engine casings or gas centrifuge rotors. BAW rejected H+H's application for a license in August 1985. After apparently consulting with Welzien, whose private phone number was written on the denial letter, H+H filed an appeal of the rejection. A few days later, after the appeal was rejected, H+H withdrew its application stating that the order from the customer had been altered, although no such alteration had actually been requested. About a week later, H+H submitted a new application for an export license for the same customer for a flow-forming machine that in reality was as capable as the one listed on the first export application. The new application, however, stated that the machine had a lower power rating. At this new power rating, an export license was not needed. Adding to the confusion and demonstrating even more incompetence, however, the BAW quickly issued an export license for this new application. One year later, the BAW issued a letter that a license was in fact not necessary.

Later, when H+H Metalform was having difficulty getting one of its exports approved by a stubborn BAW official, Welzien recommended taking the matter to another specialist at the BAW who believed that export officials should in no way consider themselves "preventers of exports." This person was substituting for the stubborn official who happened to be on an extended leave at a spa. Welzien recommended that H+H officials take advantage of this "current good fortune."

Weak Coordination Within Governments

During an export control decision-making process, a licensing authority often seeks, or is required to seek, opinions of other government agencies, such as a foreign or defense ministry. The danger of not consulting with other agencies is highlighted by the following example. This example also shows how an order can be divided into individual packages with the intent of hiding the true end use of the order.

In 1986, H+H Metalform agreed to supply Taiwan's Chungshan Institute of Science and Technology (CSIST) a flow-forming machine. The true end-use was for the production of short-range rocket bodies, according to Dietrich Hinze, an owner of H+H.

At the end of the contract negotiations between H+H and CSIST, a Taiwanese official asked whether H+H had any objections if a public tender for the project was issued as was CSIST's common procedure, according to the trip report of the H+H representatives. H+H officials responded that H+H was the only company in the world making vertical flow-forming machines and thus no other company could respond to such a tender. They added that they had no problems if a tender was published, but recommended considering the following:

  • The entire world would be made aware of the project, which could not possibly be convenient; and

  • The critical issue was that if this project was publicized in such a way, problems would occur with the export license.

The participants in the meeting understood that the German government would have to consider the reaction of the Peoples' Republic of China, if the sale was made public. The Taiwanese subsequently agreed to place an order with H+H for one vertical flow-forming machine for the production of high pressure gas bottles, hydraulic cylinders, brake cylinders, hydraulic and telescopic cylinders.

To further camouflage the true end-use, CSIST would place a second order for the maraging steel preforms and the appropriate mandrel for the flow-forming machine. The contracts would need to be divided appropriately.

During the 1990s, as mentioned above, German export control laws were tightened. In addition to government action, the German courts interpreted the laws more stringently. In a case in 1998, a defendant was found guilty of exporting preforms of a gas centrifuge component. The judge ruled that the only use of the preforms was for gas centrifuges and these preforms would be treated legally as finished centrifuge components.

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