The European Commission has recently published the proposal for a new Regulation on controls of dual-use items. The draft Regulation is meant to update the existing EU dual-use Regulation by ensuring a simplification and harmonization of the existing export control rules.
The existing Regulation (EC) No 428/2009 lays down basic principles and common rules for the control of the export, brokering, transit and transfer of dual-use items. A common EU list of controlled dual-use items is included in an annex to the Regulation, and contains goods, software and technologies such as chemicals that can be used as precursors for toxic chemical agents, computers, cryptography equipment, sensors and lasers, explosives, surveillance systems and equipment.
The modernization of the EU export controls system foresees several changes to the rules currently in place:
- Clarification on the definition of exporter in order to clarify the application of controls to natural persons, who may be "exporters", especially when it comes to technology transfers;
- The exporter, in line with the new provisions of the Union Customs Code, has to be resident or established in the EU;
- Dual-use items are being considered not only as goods which can be used for both military and civil purposes, but also cyber-surveillance technologies are included;
- The proposal facilitates low-risk transfers of Intangible technology transfers (ITT) as they only become subject to control when the dual-use technology is made available to a person in a third country, which is in particular expected to facilitate the use of cloud services;
- Technical assistance is now being defined by the Regulation and applicable controls are defined as well;
- The risk that controls on brokering controls are circumvented is reduced by extending the definition of the broker to subsidiaries of EU companies outside of the EU, as well as to brokering services supplied by third country nationals from within the EU territory. Moreover, in order to ensure their consistency and effectiveness, the proposal harmonises their application to non-listed items and military end-uses and extends their application to terrorism and human rights violations;
- The application of transit controls is harmonised to non-listed items and military end-uses, and extends controls to the risk of misuse for terrorist acts and human rights violations;
- In order to counter illicit trafficking, certain controls – e.g. on brokering, technical assistance - will apply throughout the EU jurisdiction – including controls on the activities of EU persons located in third countries. In addition, an anti-circumvention clause is being added, thus establishing an EU-wide legal basis for the prosecution of export control violations ;
- The harmonisation of licensing processes goes through:
- a definition of authorisations and for common licensing parameters (e.g. validity period) and
- conditions for use of the EUGEAs (registration, reporting requirements...) and for global licences (requirement for an Internal Compliance Programme);
- A new authorisation for 'large-projects' is proposed for certain large multiannual projects e.g. construction of a nuclear power plant, providing the benefit of one single licence covering all related export operations, for the duration of the project;
- New general authorisations (EUGEAs) are introduced to facilitate trade with regard to encryption, low Value Shipments, intra-company transmission of software and technology, "other dual-use items" (e.g. frequency changers).
Furthermore, the proposal expands the delegation of competence for the Commission to modify destinations or items on EUGEAs, with a view to ensuring that the EU export control regime becomes more flexible and capable of reacting to technological or economic developments.
- The review of the current export controls system can bring benefits to EU companies for the following reasons:
- The new EU General Export Authorisations (EUGEAs) should reduce time and costs for both companies and licensing authorities;
- For EU exporters wishing to apply for global licences the requirement to implement an effective Internal Compliance Programme (ICP) will apply, that is a set of formal measures and procedures ensuring compliance with export controls. Small companies that cannot afford to develop a formal ICP can export under most general authorisations and/or individual licences.
- The proposal is expected to improve the international competitiveness of EU operators as certain provisions – e.g. on technology transfers, on the export of encryption – will facilitate controls in areas where third countries have already introduced more flexible control modalities.
The proposal for a new EU dual-use Regulation was submitted to ordinary legislative procedure, therefore the legislators will have the possibility to propose amendments to the draft text. Hence, the adoption of the proposed text cannot be expected before one year and a half.
Meanwhile, EU exporters will have the time to adapt to the new setup of the rules on export controls and adopt Internal Compliance Programmes on export controls if the request of global licences is envisaged.
For more information about the consequences of the review of the EU export controls system for your business you can contact us at firstname.lastname@example.org or (+32) 15 46 08 46.