But Eric Beston, an assistant secretary at the DTI, said this did not necessarily mean it would be used for making armaments. It could be used for industrial purposes like motor manufacturing.
The court had been told earlier that government ministers continued to approve export licences to enable intelligence services to get more information on President Saddam's nuclear programme.
The information that the machinery made by the Coventry- based engineering company Matrix Churchill was consigned to an arms factory in Iraq was contained in a secret Foreign Office memo.
The Foreign Office wanted the exports to continue in order to keep open an intelligence network about the state of Iraq's nuclear programme, the court was told.
The memo warned that if Matrix Churchill was refused export licences the company might have to close, and the firm's managing director, Paul Henderson, would no longer be able to act as a source for MI6.
The exports were approved after a meeting between William Waldegrave, then at the Foreign Office, Alan Clark, of the DTI, and Lord Trefgarne, of the Ministry of Defence, the court was told.
Mr Henderson and two other Matrix Churchill executives, Peter Allen and Trevor Abraham, deny exporting or attempting to export prohibited goods to Iraq.
The trial continues today.