Methods of Strategic Trade Analysis: Data-Driven Approaches to Detect Illicit Dual-Use Trade

191 Pages·2022·4.527 MB·English

by  Christopher Nelson

Advanced Sciences and Technologies for Security Applications
Christopher Nelson
Methods
of Strategic
Trade Analysis
Data-Driven Approaches to Detect Illicit
Dual-Use Trade
Advanced Sciences and Technologies for
Security Applications
Editor-in-Chief
Anthony J. Masys, Associate Professor, Director of Global Disaster Management
Humanitarian Assistance and Homeland Security, University of South Florida
Tampa, USA
Advisory Editors
Gisela Bichler, California State University
San Bernardino, CA, USA
Thirimachos Bourlai, Lane Department of Computer Science and Electrical
Engineering
Multispectral Imagery Lab (MILab), West Virginia University
Morgantown, WV, USA
Chris Johnson, University of Glasgow
Glasgow, UK
Panagiotis Karampelas, Hellenic Air Force Academy
Attica, Greece
Christian Leuprecht, Royal Military College of Canada
Kingston, ON, Canada
Edward C. Morse, University of California
Berkeley, CA, USA
David Skillicorn, Queen's University
Kingston, ON, Canada
Yoshiki Yamagata, National Institute for Environmental Studies
Tsukuba, Ibaraki, Japan
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Christopher Nelson
Methods of Strategic Trade
Analysis
Data-Driven Approaches to Detect Illicit
Dual-Use Trade
Christopher Nelson
Strategic Trade Control Research Group
Jersey City, NJ, USA
ISSN 1613-5113 ISSN 2363-9466 (electronic)
Advanced Sciences and Technologies for Security Applications
ISBN 978-3-031-20035-9 ISBN 978-3-031-20036-6 (eBook)
https://doi.org/10.1007/978-3-031-20036-6
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To the thousands of dedicated civil servants,
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to keep us safe from the spread of the world’s
most dangerous weapons and technologies.
Preface
Methods of Strategic Trade Analysis addresses ways that governments, international
organizations, and other stakeholders can utilize data to uncover illicit trade in dual-
use materials and equipment that could be used to support chemical, biological,
nuclear, and other advanced military systems. Proliferators have consistently taken
advantage of the weaknesses in the international trading system to advance their
efforts over the past 50 years, from Iran to Libya to North Korea. Illicit acquisition
of strategic goods remains a major international security concern, but there are few
references on how to practically approach identifying and disrupting these behav-
iors. Bad actors exploit the massive volume of international trade, limited resources
of customs authorities, and general lack of understanding of strategic goods to hide
their activities with little chance of being detected. Existing literature on capacity
building in arms control and non-proliferation has focused on developing robust
domestic regulations, institutions, and standards. This book fills a gap by providing
practical pathways for understanding, detecting, and disrupting illicit procurement
of materials and equipment needed to produce WMDs and advanced weapons.
Topics include the effective use of international trade data, market share analysis,
transshipment/re-export estimation, machine learning techniques, and network
analysis – all within the context of strategic trade.
vii
Keywords
Export controls; Strategic trade controls; Illicit trade; Nonproliferation; Weapons of
mass destruction; Customs; Data science; Machine learning; Social network analy-
sis; CBRN; Dual-use; Transshipment; International trade; Strategic trade control
enforcement; Smuggling
ix
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2 Introduction to Strategic Trade Analysis . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The International Trade Analysis Landscape . . . . . . . . . . . . . . . . . . 5
2.2 What Is Strategic Trade? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Development of Strategic Trade Obligations and Initiatives . . . . . . 10
2.4 STA Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 The Need for Strategic Trade Analysis . . . . . . . . . . . . . . . . . . . . . . 15
2.5.1 Lower Priority Relative to Other Security Concerns . . . . . . 16
2.5.2 Volume of International Trade . . . . . . . . . . . . . . . . . . . . . . . 16
2.5.3 Nature of Strategic Goods . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5.4 Regulatory and Jurisdictional Issues . . . . . . . . . . . . . . . . . . 19
2.5.5 Wide Range of Parties Involved in Transactions . . . . . . . . . 20
2.5.6 Data and Strategic Goods Detection . . . . . . . . . . . . . . . . . . 21
2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3 Fundamental Systems of Strategic Trade Analysis . . . . . . . . . . . . . . . 25
3.1 The Harmonized System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Strategic Trade Controls and ECCNs . . . . . . . . . . . . . . . . . . . . . . . 28
3.3 Correlation Between the HS and STCs . . . . . . . . . . . . . . . . . . . . . . 31
3.3.1 Connecting the Dots Through Correlation Tables . . . . . . . . 34
3.4 Evolving Nomenclatures and HS2022 Amendments . . . . . . . . . . . . 35
3.5 Data Availability for STA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4 Introduction to STA Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1 Script for Illicit Strategic Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.2 Strategic Trade Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.3 Mirror Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.4 Market Share Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
xi
xii Contents
4.5 Transshipment and Re-export Analysis . . . . . . . . . . . . . . . . . . . . . . 44
4.6 Machine Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.7 Network Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
4.8 Applications of Strategic Trade Analysis . . . . . . . . . . . . . . . . . . . . . 45
5 Scripting an Illicit Strategic Trade Transaction . . . . . . . . . . . . . . . . . . 47
5.1 Scripting Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.2 Script for an Illicit Strategic Goods Transaction . . . . . . . . . . . . . . . 48
5.2.1 Act I—Arranging the Acquisition . . . . . . . . . . . . . . . . . . . . 49
5.2.2 Act II—Purchase and Pre-shipment Arrangements . . . . . . . 52
5.2.3 Act III—Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.3 Using the Script . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6 Strategic Trade Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.1 Transaction-Level Risk Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.2 Risk Indicators Based on Historical Data . . . . . . . . . . . . . . . . . . . . 64
6.3 Advanced Risk Assessment Indicators . . . . . . . . . . . . . . . . . . . . . . 65
6.4 Examples of Adding Layers to Risk Indicators . . . . . . . . . . . . . . . . 66
6.4.1 K eyword Searches and Commodity-Specific Monikers . . . 66
6.4.2 Restricted Entity Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.5 Application of Risk Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.5.1 I ntegration into Customs Risk Management
Systems (CRMs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.5.2 Reviewing Past Transactions . . . . . . . . . . . . . . . . . . . . . . . . 70
6.6 Pros and Cons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.6.1 Pros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.6.2 Cons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7 Mirror Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.1 Differences in Reported Trade Data . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 What Can Mirror Statistics Tell Us? . . . . . . . . . . . . . . . . . . . . . . . . 77
7.3 Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.3.1 Identify the Target Strategic Good(s) . . . . . . . . . . . . . . . . . . 79
7.3.2 I dentify Trade Partner(s) and Flows of Interest . . . . . . . . . . 80
7.3.3 Gathering Trade Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.3.4 Analysis—What Are We Looking For? . . . . . . . . . . . . . . . . 80
7.3.5 Complementary Research . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.4 Example Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.4.1 Canadian Exports of Heavy Water . . . . . . . . . . . . . . . . . . . . 82
7.4.2 N uclear Cooperation Between South Korea and the
United Arab Emirates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.5 Mirror Statistics: Pros and Cons . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
7.5.1 Pros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88