The Chemical Industry and Compliance with the Chemical Weapons Convention: Paper 2

I. Introduction

The Chemical Weapons Convention (CWC) bans the development, production,stockpiling, transfer and use of chemical weapons. Since the CWC specificallybans the production of CW it became inevitable that this arms control treatywould have a major impact on the global chemical industry as well as onthose related industries which use chemicals that appear on the schedulesof the CWC. The types of control which evolved during the negotiations involverequirements for commercial companies to make declarations that cover bothchemicals and production facilities, annual inspections on some facilitiesand the random on-site inspection of many other production facilities.

There are many chemicals with legitimate commercial uses which could alsobe used as precursors in the production of chemical warfare agents. Theseare considered to be "dual-use" chemicals in the CWC and so therewas a need to control these chemicals to prevent misuse while, at the sametime, not preventing their legitimate use in industry. The result was ArticleVI of the CWC - activities not prohibited under this Convention; the Annexon chemicals that includes guidelines and three schedules of chemicals ofdecreasing risk to the aims of the CWC and the Verification Annex. It isthe latter which is the concern of industry in that it describes in detailthe verification procedures that flow from the required national declarations.Under the Verification Annex, the chemical industry needs to be familiarwith:

• Part I: definitions;
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• Part II: general rules of verification;
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• Part VI: activities not prohibited under this Convention in accordance with Article VI, regime for schedule 1 chemicals and facilities related to such chemicals;
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• Part VII: activities not prohibited under this Convention in accordance with Article VI - regime for schedule 2 chemicals and facilities related to such chemicals;
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• Part VIII: activities not prohibited under this Convention in accordance with Article VI - regime for schedule 3 and facilities related to such chemicals;
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• Part IX: activities not prohibited under this Convention in accordance with Article VI - regime for other chemical production facilities; and
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• Part X: challenge inspections pursuant to Article IX.

It can be seen from this that the impact on industry follows from ArticleVI with a small probability of challenge inspections under Article IX. Mostindustrial activities will involve schedules 2 and 3 and the requirementsunder "other discrete organic chemicals" as defined in the CWC.

The chemical industry as represented by its major national organisations,was involved with the CWC negotiation process for many years and has hada significant impact on the text of the Convention. The Chemical ManufacturersAssociation (CMA) has been involved in the education of US government officialsfor many years and through the working group set up by the CMA, under thedirection of Mr W. D. Carpenter, have established working relationshipswith many nongovernment organisations such as SIPRI and Pugwash. All ofthis led to representatives of the chemical industry being invited by Westerngovernments to participate in special sessions at the Conference on Disarmament(CD) in Geneva. This also led to significant co-operation with other nationalchemical organisations such as the European Chemical Industry Trade Association(CEFIC), the German Chemical Industry (VCI), the Canadian Chemical Producers'Association (CCPA), the Japanese Chemical Industry Association (JCIA) andthe Chemical Confederation of Australia (CCA) to name some of the more activeparticipants.

In September 1989, the Australian Government sponsored a government-industryconference to promote communication between government and industry. Thisled to a statement by the chemical industry associations on the CWC whichclearly articulated its commitment to supporting a total ban on the productionof chemical weapons and willingness to co-operate in making sure that theban was effective. It was also aware of the possible adverse effect of sucha ban on chemical weapons in the operation of industrial production facilities.The chemical industry has continued its co-operation with the PreparatoryCommission (PrepCom) and the Provisional Technical Secretariat (PTS). Unfortunately,the trade associations only cover 80% or so of the producers of chemicals.This means that there are many producers, processors or consumers of chemicalswho are still unaware of their obligations under the CWC to declare theiractivities with chemicals listed on schedules, or the possibility that theiractivities could be subject to on-site inspection by the international inspectorsof the Organisation for the Prohibition of Chemical Weapons (OPCW). Theserequirements follow from the CWC itself, and there will be other nationalobligations that follow from national implementation legislation and theestablishment of a National Authority.

The problems that industry foresees from the implementation of the CWC atthe national and international level and are:

• declarations;
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• on-site inspections; and
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• confidentiality.

II. Declarations

The principal obligation of any company involved with production or tradein chemicals that appear on the schedules of the CWC is mandatory declarationsof activities which may include production, processing, consumption, importingand exporting of scheduled chemicals. The reporting requirement is subjectto threshold amounts which depend on the schedule on which the chemicalappears, with inspection then being dependent on an incremental threshold.

Once the CWC enters into force these declarations must be provided to theOPCW by the National Authority within 30 days. After the initial declarationsthere will be a requirement to provide two reports annually; an estimateof production and use 60 days before the end of the calendar year and afinal report on actual production, etc., 90 days after the end of the calendaryear. If production targets change, a revised declaration is required within5 days. New production facilities will have to be declared before productionbegins. There is also a requirement for declaration of past production ofboth schedule 2 and 3 chemicals specifically produced for CW purposes atany time after 1 January 1946. The accuracy of the data supplied will bedetermined by the National Authority and by routine on-site inspection carriedout by the OPCW inspectors. The unusual features are the collection of dataof a regulatory nature by the National Authority for transmission to anInternational Authority - the OPCW and international inspectors.

The data reporting requirements will pose a serious problem especially forsome of the smaller producers. The chemical industry is used to living ina regulatory environment with reporting requirements for several governmentagencies and sometimes involving more than one level of government. However,the CWC requirements involve relatively low thresholds and some aspectsof the requirements cross what business will see as confidential businessinformation that could, in the wrong hands, compromise trade secrets. Theinitial problems are threefold: (i) the timetable of the CWC willmake it difficult to for the National Authority to develop the necessaryregulations in time; (ii) it is the State Party that has to submitthe declarations; (iii) the information required for the declarationis held by industry, part of which is unaware of its obligations under theCWC.

The latter is a consequence of most States Parties having an inadequatedata base on the commercial production and use of those chemicals on schedules2, 3 and 'other discrete organic chemicals'.

III. Inspections

The OPCW anticipates inspecting all commercial facilities that produce,process or consume schedule 2 chemicals above the threshold. A FacilityAgreement should be negotiated during this initial inspection and will becomethe basis of all future inspections. The agreement will be negotiated bythe National Authority and the OPCW with assistance from the plant management.If an agreement is not reached within a specified time then inspectionswill be controlled by "managed access"; again this will be thesubject of negotiation between the inspection team and the National Authority.Industry is concerned about the preparation of this legal document whichgives access to their sites without their having formal input into the process.This document limits the activities of the inspectors as well as outliningthe obligations of the plant management. It delineates the extent of accesswhich may be granted to the inspection team to other parts of the facilityif required to clarify ambiguities that may result from the inspection.

Schedule 3 facilities are also subject to routine inspection after entryinto force but there is no requirement for an "initial" inspectionnor a Facility Agreement although the CWC makes a provision for one if thefacility requested it.

The inspection regime for other chemical production facilities is not scheduledto begin until four years after entry into force and then only after furtherdebate at the Conference of States Parties.

As well as routine, short notice inspections, there is also a provisionfor challenge inspections at any site, declared or undeclared, at both governmentand commercial facilities. There must be grounds for suspicion that activitiesprohibited by the CWC are taking place. This information has to be documentedby the challenging State and there are complex procedures to balance intrusivenesswith legitimate concerns over either security or trade secrets with theneed to resolve the compliance concern. This challenge procedure shouldbe of little concern to industry, but it and the National Authority shouldbe prepared for such eventualities.

Any company which has to provide declaration information to the NationalAuthority for eventual transmission to the OPCW must prepare for inspections,especially if there is a need to protect CBI. There will be a need to preparefor the development of Facility Agreements, pre-inspection assessments,training of plant personnel and plant escorts, development of routes tobe followed in plants by OPCW inspectors accompanied by reprentatives ofthe National Authority.

In their preparations for inspections, companies should consider the following:

• possible audit of plant records;
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• collection of samples and preparation for their analysis at several locations;
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• methods whereby confidential business information can be protected;
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• development of managed access techniques.
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• training facility personnel; and
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• insuring that the National Authority is familiar with the plant and plant site.

IV. Confidential Business Information (CBI)

The protection of CBI is critical in the chemical industry since thebusiness environment is extremely competitive. Profitability depends ontrade secrets as much as patented processes since most basic research isin the public domain. However, there is not total agreement as to what CBIis and what regulations should cover it. The nature and scope of CBI isa matter of controversy in most regulatory arenas. In the development ofthe CWC, the negotiators paid attention to the concerns of the industryrepresentatives and a real attempt was made to address their concerns. Thishas continued in the PrepCom and the PTS where the problems of CBI are beingconsidered by an expert group (see reports PC-VI/B/WP.1 and PC-VI/B/WP.15of 14 January and 18 March 1994 respectively).

There are provisions within the articles of the CWC and the verificationannex in the language directed at both routine and challenge on-site inspections.Inspection teams must avoid undue intrusion into a State Party's chemicalactivities and perform inspections "in the least intrusive manner"while a State Party has the right to prevent the disclosure of confidentialinformation during challenge inspections.

The Annex on the Protection of Confidential Information develops guidelinesfor the handling of CBI. Facility Agreements cover the extent of inspectionof schedule 2 facilities and similar agreements could be negotiated forschedule 3 chemical production and also for production facilities for otherdiscrete organic chemicals. In the case of challenge inspection, managedaccess techniques may be employed to protect CBI. For the companies concerned,CBI will be best protected by: (a) advance identification of informationon processes which it requires to protect, and (b) the developmentof alternate measures to demonstrate compliance.

The expert group on confidentiality is examining the ways in which CBI canbe protected and have identified the following:

• classification system for confidential information;
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• guidelines for the release of information;
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• procedures to handle branches of confidentiality;
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• possible linkage with OPCW Staff Regulations; and
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• confidentiality in model facility agreement.

All of these can be considered to be a top-down approach to confidentiality(i.e., the process moves from the OPCW to the National Authority and thenthe industrial facility). This may well be the best model for dealing withconfidentiality in the inspection process but the declaration process worksin reverse (i.e., the facility provides information, through its management,to the National Authority which then sends it in some form to the TechnicalSecretariat of the OPCW). This data collection process is a new and complexone; it will require detailed reporting on the production and use of chemicalson a scale never before attempted and at a depth that is unprecedented.Each location will report, every National Authority will have to consolidatethe data and the OPCW evaluate it on a world-wide scale. The chemical industrywhich produces chemicals and other industries that process or consume chemicalswill not have had adequate time to understand their obligations and theNational Authorities will have had little if any experience in collectingand evaluating the data that will become the basis of the National declarations.

V. Conclusion

The chemical industry, as exemplified by national and international producerassociations, has played a major role in the development of the CWC especiallywith respect to Article VI and its annexes. It remains firmly against theproduction of chemical weapons and is prepared to assist in the regulatoryprocess required to demonstrate that certain chemicals are not misused forCW purposes, but there is a feeling that the process is probably too cumbersometo work effectively in the short term. It has also been claimed that thePrepCom has not made good use of the contacts with the chemical industrydeveloped during the negotiation of the CWC in Geneva.

Successful completion of the tasks ahead requires a new and serious collaborationat the State level between the National Authorities and those industrieswhich produce and use chemicals that have been judged to pose a risk tothe objectives of the CWC. Initial efforts must be directed at acquiringall relevant information from industry required to accurately complete nationaldeclarations. This has to be done without damaging the chemical manufacturers'competitive edge. Effective verification depends on the quality and comprehensivenessof the declarations. Industry must also be able to depend on the NationalAuthority when verification techniques such as on-site inspection come intoplay. This will require outreach and training sooner rather than later.

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(September 1994)