Chemical Trade Control and Article XI of the CWC: Paper 4

I. Introduction

Article VII-National Implementation Measures-is quite general in itswording and leaves it open to individual States Parties to decide how theywill implement the provisions of the Chemical Weapons Convention (CWC).The size and stage of development of the chemical industry in a countrywill, of course, have a major impact on such decisions, as will many otherfactors. The CWC takes the approach that the responsibilities of each StateParty must be institutionalized in order to ensure: (a) thatthe obligations of the States Parties under national implementation arefulfilled, and (b) that in the future the OPCW will be able to communicatein an effective way with the National Authority of the State Party. As theStates Parties prepare for implementation, each must analyse its situation,constitutional, industrial, and so on, and decide how to establish its NationalAuthority.

There are two major functions related to the National Authority under theConvention: (a) the requirement to establish a system which can meetthe obligations of the State Party, and (b) the ability to providethe chemical industry of a State Party with the assurance that no disclosureor discharge of confidential information will occur in the process of providingthe information requested to the International Organization.

II. Data reporting and the National Authority

The most important functions of the National Authority include meetingthe continuous and annual data-reporting requirement for each State Partyunder the Convention, including reporting data on scheduled chemicals, dataon the import and export of chemicals on Schedules 1, 2 and 3, data on unscheduleddiscrete organic chemicals and 'PSF' chemicals and data on research activities.The National Authority will be responsible for three different types ofdata reporting: (a) the first declaration after entry into forceof the Convention for the State Party, (b) annual data reporting,and (c) reporting anticipated activities and changes in activitiesreported previously. There will be a need to ensure that such data are retrievable,authorized and assessable on the National Authority level.

The National Authority must be able to ensure its chemical industry thatno loss of confidential business information (CBI) will occur either duringimplementation or during the 'life' of the Convention.

III. Export control measures and Article XI

A primary controversy as regards the future of export control regulationsis whether: (a) to keep existing export control measures at various levels(national, regional, and international, such as the Australia Group) untilthe States Parties have evidence that the export control system functionsunder the CWC; or (b) upon entry into force to review all existing measuresand abandon organizations such as the Australia Group. The subject is highlypoliticized and controversial because it involves differing views of theCWC: (a) the CWC as a non-proliferation treaty, (b) the CWCas a treaty for development, or (c) the CWC as a treaty to facilitatetrade with chemicals and technology.

It may be useful to recapitulate briefly how the CWC deals with the transferor trade of chemicals. In the CWC four articles directly or indirectly addressthis area:

• 1. Article I, paragraph 1(a): each State Party undertakes never to 'transfer, directly or indirectly, chemical weapons to anyone'; and paragraph 1(d): each State Party shall not 'assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under [the CWC]'.
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• 2. Article VI, paragraph 2: each State Party 'must adopt necessary measures to ensure that toxic chemicals and their precursors are only developed, produced, otherwise acquired, retained, transferred, or used within its territory or in any other place under its jurisdiction or control for purposes not prohibited under [the CWC]'.
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• 3. Article VII, paragraph 1(c): each State Party shall 'extend its penal legislation enacted under subparagraph (a) to any activity prohibited to a State Party under this Convention undertaken anywhere by natural persons'.
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• 4. Article XI, paragraph 2(e): each State Party is required to 'undertake to review their existing national regulations in the field of trade in chemicals in order to render them consistent with the object and purpose of the [CWC]'.

The detailed obligations for the transfer of chemicals are presentedin the Verification Annex concerning the scheduled chemicals. The generalprinciple applied is: Any transfer of scheduled toxic chemicals or theirprecursors among States Parties must be for purposes not prohibited by theCWC. The specific principles for the three schedules are described inthe following discussion.

For Schedule 1 chemicals, only transfer for non-prohibited purposes to StatesParties is allowed; transfer to non-States Parties will generally be prohibited.If transfer takes place, the following information is required: (a)the chemical name, structural formula, and Chemical Abstract Service registrynumber; (b) the quantity acquired from other states or transferredto other states; and (c) for each transfer, the quantity, recipientand purpose.

For transfer of chemicals on schedules 2 and 3, the CWC takes a twofoldapproach requiring: (a) specific declarations on transfer (export)to states in general; and (b) specific declarations on transfer (export)to states not parties to the CWC.

For Schedule 2 chemicals above the declaration threshold, information hasto be submitted in the annual declarations on past activities on the totalamount exported in the previous calendar year and on the purpose for whichthe chemicals will be exported, including specifying the state(s) to whichexport will be made in the coming year.

For Schedule 2, if export is to a state which is not a party to the CWC,export can only occur for three years after entry into force of the CWC;thereafter transfer will be permitted only to States Parties to the CWC.In this interim period transfer to non-States Parties will be allowed ifend-use certificates are presented. The certificate is to include: (a)a statement by the recipient state that the chemical will only be used forpermitted purposes, (b) assurance that the chemical will not be retransferred,(c) the types and quantities of the chemical, (d) its end-use(s),and (e) the name(s) and address(es) of the end-user(s).

For Schedule 3 chemicals above the declaration threshold, information hasto be submitted in the annual declarations for the previous calendar yearon aggregate national data for export of each chemical and specificationof export for each country.

For Schedule 3, if export is to a state which is not a party to the CWC,an interim period of five years is built into the CWC. The existing regulationsfor the transfer of chemicals have to be reviewed after these 5 years withconsideration given to whether new measures have to be applied. In the interimperiod, transfer to non-States Parties will be allowed if end-use certificatesare presented. The certificate shall include: (a) statement by therecipient state that the chemical will only be used for purposes not prohibited,(b) insurance that the chemical will not be retransferred, (c)types and quantities of the chemical, (d) end-use(s); and (e)name(s) and address(es) of the end-user(s).

There are two obligations related to the transfer of schedules 2 and 3 chemicalsfor the individual State Party under the CWC: (a) if transfer takesplace to a State Party it has to be assured that the required information(see above) is available; (b if transfer takes place to a state notparty to the CWC, end-use certificates must be obtained.

If a State Party can assure that the required information will be obtainedunder its existing transfer regulations (export regulations), the StateParty may retain its transfer regulations for Schedule 2 and 3 chemicalsfor at least 3-5 years. It will not be forced to change its existing regulationsin order to meet the reporting obligations under the CWC. After 3 yearsthe transfer of chemicals under Schedule 2 to States not Parties to theCWC will no longer be allowed. What will happen to the transfer regulationsregarding Schedule 3 chemicals after 5 years is still an open question.

Article XI, paragraph 2(c), must be recalled in any discussion of exportcontrols. It recommends that States Parties shall:

'Not maintain among themselves any restrictions, including those in anyinternational agreements, incompatible with the obligations undertaken underthis Convention, which would restrict or impede trade and the developmentand promotion of scientific and technological knowledge in the field ofchemistry for industrial, agricultural, research, medical, pharmaceuticalor other peaceful purposes.'

Although this obligation is general, an individual State Party must considerit when deciding the form its national trade and transfer control systemshould take. The approach is twofold: States Parties undertake to 'reviewtheir existing national regulations' with the purpose 'to render them consistentwith the object and purpose of this Convention', and also pledge to implementthe Convention in a manner that does not hamper the 'economic and technologicaldevelopment' of other States Parties.

A State Party must establish an export control system which allows for bothstrengthening and relaxing controls, depending on the country (State Partyor state not party to the CWC) to which the transfer is being made, andthe export control measures that already exist. The effectiveness of anycontrol-system will naturally depend on the ability of the government ofa State Party to ensure that industry and customs - through which any chemicalproduct will have to pass - comply with new and existing legislation.

A number of countries have already established export control measures,and the wording of the CWC - 'undertake to review their existing nationalregulations in the field of trade in chemicals' - provides additional guidance.The following tools for a system of export control thus might be considered:

(a) export licences,

(b) end-use statements,

(c) re-export certificates,

(d) post-shipment checks,

(e) import controls,

(f) in-transit shipment controls, and


(g) control of know-how transfer.

Existing laws such as the criminal code of a country, customs act, internationaltrade law, and the like may be adequate or new laws may need to be created.In most countries, national law supersedes international law, and the necessarylegislation for an international treaty such as the CWC must therefore beincorporated into national law.

Taking into account the fact that many States Parties are now preparingimplementation legislation there is already a need to consider the requirementsof the CWC for the control of the export of chemicals. Countries will haveto review and adjust their existing regulations to meet their obligationsunder the CWC. They will also have to keep in mind that after 3 or 5 yearsthe need may arise to address new requirements related to the transfer ofschedule 2 and 3 chemicals to States Parties and non-States Parties.

Lastly, it should be recalled that a State Party under the CWC has the rightto transfer chemicals if this is done in accordance with the obligationsassumed under the CWC.

IV. International co-operation

Some of the signatory nations and their chemical manufacturers may nothave had extensive experience in reporting information or of being subjectto international inspection. There will be initial difficulties for themin fulfilling their obligations, including the control of the transfer ofchemicals, under the Convention.

Questions of co-operation and possible harmonization in the area of exportcontrol measures will be of importance since major chemical enterprisesoften have facilities located on the territory of more than one State Party.Certain rules and procedures for inventorying on the national level maycreate concern in some States Parties about competition and confidentialityin the chemical industry.

Here the regional chemical industry associations could be of assistancein addressing such concerns. Other areas for active involvement by chemicalindustry associations could include: (a) providing general assistanceand support, (b) supporting and providing information to individualcountries in their legislative activities related to export regulations,(c) exchange of experience and expertise, (d) aiding individualcountries in their efforts to set up a National Authority and the necessarydata reporting system, and (e) assisting the training of specialistsfor the National Authority and data auditing.

The CWC could serve as a vehicle to review and improve existing trade regulationsdealing with chemicals and equipment and also help to strengthen effortsto harmonize regulations related to the export of dual-use goods. A commonpolicy for the harmonization of export control regulations is currentlyreceiving increasing attention and will gain additional momentum if theCWC enters into force. An active role can clearly be taken in the implementationprocess and the co-ordination of common undertakings by countries whichmay be organized in an association, national or regional chemical manufacturersassociations (such as the Confédération Européennedes fédérations d'industrie chimique - CEFIC - in Europe,the CMA in the USA or the Japanese Chemical Trade Association) or groupsof countries in a region such as those in South America.

V. SIPRI and national implementation

SIPRI's Chemical and Biological Warfare (CBW) Project continues to monitorclosely the international and national implementation of the CWC. Internationalimplementation - the setting up of the Organization for the Prohibitionof Chemical Weapons in The Hague - will be followed closely and documentedin the annual SIPRI Yearbook chapters.

With its 1990 publication on national implementation, National Implementationunder the Future Chemical Weapons Convention (no. 11 of the SIPRI Chemical& Biological Warfare Studies Series), by Professor R. G. Sutherland andDr Thomas Stock, the CBW project began work on this important part of theimplementation issue. Owing to the clear need to support the national implementationundertakings of the States Parties, the SIPRI-CBW project has begun workon a follow-up study for 1994-95 which is supported by the German Volkswagen-Foundation.This project, 'Effective Implementation of the CWC', is a joint projectbetween the University of Saskatchewan (Canada), the University of Frankfurt(Germany) and SIPRI.

The SIPRI CBW Project has already contacted the signatory States Partiesasking for information about the ongoing process of implementation and thelegislation envisaged by them. SIPRI is attempting to follow and analysethe national ratification process very closely.

In addition, during the past two years contacts have been established withmany States Parties concerning the issue of export control regulations.On the basis of responses to a questionnaire and other official information,the SIPRI CBW Project is now finalizing a research project which analysesin detail the export control regulations of approximately 50 nations anddraws conclusions about future requirements under the Convention. The resultswill be published by SIPRI in 1995.

I would like to use the opportunity of this seminar to request the officialrepresentatives of the states which are present to kindly support our workand to consider the summary of information recorded thus far which is presentedin Annexe IV of this paper.

Annexe I. Main tasks of a National Authority under the CWC

(a) communication with OPCW and other States Parties:

• contact point,
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• co-operation obligation,
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• legal assistance.

(b) fulfil initial and annual declaration obligations:

• submission of declarations,
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• compiling information gathered from industry about scheduled chemicals,
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• preparation of aggregates of industry data,
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• protection of CBI.

(c) facility agreements:

• overseeing and advising on the process of negotiating facility agreements,
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• review and protection of areas of CBI,
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• access to data transmission,
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• safety regulations,
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• determination of special procedures,
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• plant support service.

(d) inspection activities (co-ordination, reporting):

• co-ordination of, co-operation in and carrying out of OPCW inspections,
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• identification of escorts,
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• setting up of a support system for inspectors,
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• preparation of plant sites for forthcoming inspections (planning, training),
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• review of aspects of CBI,
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• provision of a support system for inspectors,
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• preparation of briefing material.

(e) destruction obligations

(only if there are CW, CWPFs, old CW or abandoned CW)

• co-ordination, declaration and supervision of destruction,
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• preparation of first and annual declarations.

(f) clarification function

• during inspections by OPCW,
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• during challenge inspections,
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• scrutiny of consistency of declarations.

Annexe II. Transfer of chemicals under the CWC

Schedule 1

limitation: 1 tonne

transfer : only between States Parties

declaration of transfer with information on:

(a) the chemical name, structural formula, and Chemical Abstract Service registry number;

(b) the quantity acquired from other states or transferred to other states; and


(c) for each transfer the quantity, recipient and purpose shall be included.

Schedule 2

limitation for declaration: 1 kg (for BZ) or 100 kg for chemicalsfrom Schedule 2, part A; 1 tonne for chemicals from Schedule 2, part B;

during first three years after the CWC enters into force:

transfer to both States Parties and non-States Parties is allowed;

for transfer to non-States Parties during first three years end-usecertificate is required which shall include statement:

(a) by the recipient state that the chemical will only be used for purposes not prohibited;

(b) that the chemical will not be re-transferred;

(c) of types and quantities of the chemical;

(d) of end-use(s); and


(e) of the name(s) and address(es) of the end-user(s).

for transfer to States Parties the recipient State Party has toreport on imported chemicals and the exporting State Party has to reporton the export in both the annual declaration on anticipated activities andthe initial declaration about the previous three calendar years.

after three years transfer is allowed only to States Parties.

Schedule 3

limitation for declaration: 30 tonnes;

during first five years after the CWC enters into force:

transfer to both States Parties and non-States Parties is allowed;

for transfer to non-States Parties during first five years end-usecertificate is required which shall include statement:

(a) by the recipient state that the chemical will only be used for purposes not prohibited;

(b) that the chemical will not be re-transferred;

(c) of types and quantities of the chemical;

(d) of end-use(s); and


(e) of the name(s) and address(es) of the end-user(s).

no possibility to trace the transfer to States Parties; thereis an obligation that the producing State Party shall give information aboutthe production purposes, which might contain transfer information;

after five years review regulations and consider the establishmentof other measures.

Annexe III. Glossary of export control measures

Export licences should be required for all chemicals scheduledin the CWC. A well-functioning export control mechanism should also includeexport licences for material, technology and equipment used in the productionof chemical weapons and at chemical weapons production facilities. The mostlikely department to issue such licences is the relevant ministry of internationaltrade in the respective countries. Customs should be responsible for checkinglicences before goods exit a country.

End-use statements should be included under export control licensingwhere the receiving party states what the product is intended for and certifiesthat the product will not be used for re-exports. If the productsare intended for re-export, this should be stated in the original exportlicense; this should be done in accordance with the laws of each countryinvolved in the transfer. An export licence should be contingent on theend-use statement.

Post-shipment checks should be carried out to ensure that the exportedproduct is used for the intended purpose. These checks can be carried outby the exporter, customs or relevant authority in the importing country.The received information should then be reported to the licensing authorityin the exporting country. Post-shipment checks could constitute a secondpart of the end-use statement.

Penalties should to be levied in the event of non-compliance. Thesecan take the form of criminal or administrative penalties or, in some cases,both. To avoid long legal processes, one person should be listed as responsibleon the export licence, and should be the individual penalized in the eventof non-compliance.

Import controls can prove to be equally important. In order to havecomplete control of the trade in dual-use chemicals, equipment and technology,both import licences and end-use statements are recommended for these products.Imports should be controlled through customs, and an importer should berequired to apply for an import licence at the department which issues exportlicences. The goods and products that require an import licence should beequivalent to those goods and products that require an export licence.

In-transit shipment controls should be employed by customs in orderto control the movement of goods within a country. Such shipments shouldrequire a time-restricted license and be checked at the points of entryand exit. This would enable a government to keep exact control of the whereaboutsof chemicals, technology and equipment within its boundaries.

Control of know-how is difficult, but essential. A licence should berequired for any transaction of knowledge, patents or construction aid relatingto chemicals, equipment and technology that can be used for the productionof chemical weapons. This could be controlled through the emigrant bureauand the customs department in the respective countries. Moreover, an individualshould be obliged to ensure that no illicit activity is occurring.