Export Control Enforcement: Lessons From The Airbus Settlement

Airbus Operations Limited (AOL), a UK division of Airbus, has paid more than £6.4 million to HMRC after admitting multiple breaches of strategic export controls, the highest compound settlement ever reached by HMRC for strategic export offences.

AOL self-reported the breaches, which occurred over a sustained period before November 2022, with HMRC confirming that the offences related to Airbus's failure to keep records of the export or transfer of controlled technology.

In its press release, HMRC emphasised that the UK operates a strict licensing regime and will not hesitate to take action, using a wide range of powers to ensure effective export controls and enforcement on military goods. The announcement follows HMRC's decision in June to publicly name, for the first time, a firm (Petrofac Facilities Management Limited) in connection with a compound settlement, marking a significant shift in HMRC's approach to enforcement and transparency.

Regulatory framework

The primary legislation governing export controls is the Export Control Act 2002, which sets out powers to impose different types of export controls. Key secondary legislation includes:

• Export Control Order 2008 (ECO 2008): this imposes controls on the export of military and dual-use items. It also contains rules on licensing and provides for offences, enforcement and penalties for export control breaches.
• UK Dual-Use Regulation: the retained EU law instrument contains additional controls on dual-use items.

HMRC is authorised to investigate and enforce compliance with export controls under the ECO 2008. Under the Customs and Excise Management Act 1979, goods involved in a breach may be forfeited and an exporter or agent found guilty on summary conviction faces a penalty of three times the value of the goods or level 3 on the standard scale, whichever is greater.

Licensing regime

The Export Control Joint Unit (ECJU) is responsible for administering the export control licensing regime. The application process and requirements for an export licence will depend in part on the type of licence sought. The different types of licences issued include:

• An open general export licence (OGEL), which is a pre-approved licence that can be used by anyone, providing they register beforehand and comply with the terms of the OGEL;
• An assimilated EU general export authorisation (Assimilated GEA), which permits the export of specified dual-use items to specified non-EU destinations; and
• A standard individual export licence (SIEL), which permits the export of specific quantities of specific items to specific consignees or end-users up to a set quantity or value.

Airbus breaches

Article 29 of the ECO 2008 sets out the core record-keeping obligations for users of general licences such as OGELs, requiring that detailed records be maintained for each transfer. The breaches committed by AOL related to the following obligations:

• Article 29(2)(a–g) sets out the categories of information that must be recorded for each transfer carried out under a general licence, including: a description of the act and the goods involved; the dates and quantities; and the names and addresses of the licence holder, any consignee, and (where known) the end-user. AOL failed to keep accurate records of transfers of controlled technology in accordance with the conditions of three OGELs on multiple occasions.
• Article 29(3) requires that registers and records must be retained for at least four years (for general licence activity) or three years (in all other cases), unless the licence or authorisation specifies a longer period. AOL failed to keep registers in relation to OGELs on multiple occasions.
• Article 29(2)(i) provides that the registers shall contain any further information required by the licence or authorisation. AOL failed to keep accurate records contrary to OGEL conditions on multiple occasions.

AOL also failed to comply with the conditions of a SIEL on one occasion.

Key takeaways for exporters

The Airbus case is a clear signal to exporters of the need to develop and maintain robust export control compliance procedures to meet their licence obligations. In particular:

• Record-keeping: exporters should ensure that all activity involving controlled goods is traceable, easily verified and supported by an adequate audit trail (as recommended by the ECJU's voluntary compliance code of practice for export licensing). They should have a clear policy on the time, mode and place for maintaining and storing records and should ensure that their record-keeping policies and procedures comply with the relevant licence terms and are communicated to all relevant staff.
• Audits: exporters should carry out regular internal audits of their export control compliance. The ECJU may carry out visits to check compliance with licence terms, and exporters can demonstrate their commitment to compliance inspectors by maintaining a full audit trail of all activities relating to their licences.
• Voluntary disclosure: AOL self-reported the breaches to HMRC, fully cooperated with the investigation, and implemented appropriate remediation measures. There can be little doubt that this cooperation influenced HMRC's willingness to resolve the matter by way of settlement rather than criminal prosecution. Businesses that discover potential breaches should take legal advice promptly, assess the nature and extent of the breach carefully, and consider the voluntary disclosure regime before HMRC identifies the issue independently.
• Increasing scrutiny: the export control and sanctions landscape is subject to continuous and rapid change, presenting an increasingly significant compliance challenge for organisations operating internationally. The public naming of Petrofac Facilities Management Limited for accepting a compound settlement in June, followed closely by the Airbus settlement in July, confirms the shift in how HMRC handles compound settlements and its commitment to greater transparency.

As regimes expand and enforcement increases, TLT can help organisations to understand their sanctions and export controls exposure and determine whether their compliance framework is fit for purpose. Our Sanctions and export controls health check helps organisations to evaluate whether existing controls are effective in practice and where weaknesses may exist.