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C5 Export Controls 10 & 11 March 2009 Final London

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An outline of the EU recast proposals for Dual Use Export Controls

An outline of the EU recast proposals for Dual Use Export Controls


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  • 1. What you need to know about EU Export Controls now C5 3rd Annual Export Controls Conference London, 10 & 11 March 2009 Jasper Helder, partner Trade & Customs Bird & Bird LLP
  • 2. Agenda
    • EU legislative framework
      • Dual Use
      • Current requirements
      • Recast (?)
    • Implementation
  • 3.
    • EU Overview
  • 4. EU Policies (1)
    • Defense and security policy: national prerogative
    • Intergovernmental EU co-operation since 1970
    • Formalised in 1986 in Single European Act
    • EU Maastricht Treaty (1 November 1993): EU Common Foreign and Security Policy (“ CFSP ”) embedded in EU Treaty
  • 5. EU Policies (2)
    • International Arrangements
      • Wassenaar Arrangement (“ Munitions List”)
      • Missile Technology Control Regime (“ MTCR”)
      • Nuclear Suppliers Group
      • Australia Group (non-proliferation of chemical & biological weapons)
      • Chemical Weapons Convention
    • Membership: mainly EU countries individually (e.g. EU observes in Wassenaar)
  • 6. EU Export Controls Overview
    • Dual Use Goods & Technology
      • Common EU Rules
      • National Additions
    • Military Goods & Technology
      • Defence Policy is not EU authority
      • National Rules
      • Common EU Policy (Military List, Licensing Code)
    • Overlaps: from Dual Use to Military on national level
  • 7.
    • EU Dual Use Controls, Current Status
  • 8. EU Export Controls: Dual Use (1)
    • Common regime: Regulation (EC) 1334/2000
    • Lastly amended by Regulation (EC) 1167/2008
      • Annex I updated for changes made by Wassenaar Arrangement (2007), Missile Technology Control Regime (2007) and Australia Group (2007 and 2008)
      • Annex IV also updated (now includes certain detonation devices)
      • No substantive amendments of the rules themselves
  • 9. EU Export Controls: Dual Use (2)
    • EU Regulation is not exhaustive
    • National legislation EU Member States
      • Control lists (National “Catch All” additions)
      • Sanctions and related control lists
      • Application procedures for export licences
    • Dual Use Export Controls extend to some Military Goods as well
  • 10. EU Export Controls: Dual Use (3)
    • Exports of Goods subject to licensing (1)
      • Export of “dual-use” goods/ technology to non-EU countries
        • Annex I of Regulation (EC) 1334/2000
      • National “Catch All”: Non-Annex I WMD items
        • “ May be” intended for use related to chemical, biological, nuclear weapons
        • Discretion of National Authorities
  • 11. EU Export Controls: Dual Use (4)
    • Exports of Goods subject to licensing (2)
      • National “Catch All”: Non Annex I Military Use items for embargoed countries
        • Destination subject to UN, EU or OSCE embargo
        • Military end-use (incl. manufacturing, maintenance etc. of Military List items)
        • As per EU export country national Military List
        • Discretion of National Authorities
      • National “Catch All”: Prior Irregular Exports
        • Items for use in products exported without or contrary to prior export license
        • Discretion of National Authorities
      • Exporter must notify “catch all” circumstances to authorities
  • 12. EU Export Controls: Dual Use (5)
    • Exports of Goods subject to licensing (3)
      • National Catch-All (article 5)
        • Prohibition of export or licensing requirement for non-Annex I goods/technologies
        • Public security
        • Human rights
      • Discretion of National Authorities
  • 13. EU Export Controls: Dual Use (6)
    • Intra-EU transfers of Goods subject to licensing
      • Certain “sensitive” goods and technology
        • Annex IV of Regulation (EC) 1334/2000
      • If implemented by national laws: intra EU transfer for subsequent export without additional processing
        • art. 21 para 2 EU Dual Use Reg
        • UK, Germany
        • Others
  • 14. EU Export Controls: Dual Use (7)
    • No license required for transit through the EU
      • External transit (“T1 status”)
      • Storage in free zone or free warehouse
        • where no storage records are required
  • 15. EU Export Controls: Dual Use (8)
    • Intangible Exports of Technology subject to license
      • Technology: specific information necessary for the Development, Production or Use of goods, incl. Technical Assistance.
      • Export = transmission of data re. Controlled technologies to non-EU destination
        • Electronic media
        • Fax
        • Telephone (descriptive discussion of technology)
  • 16. EU Export Controls: Dual Use (9)
    • No license required for intangible exports of Technology
      • Data in the Public Domain
        • Made available without further dessimination restrictions
      • Basic Scientific Research
        • Experimental, theoretical, not primarily directed towards specific objective/aim
      • Minimum necessary information for patent applications
  • 17. EU Export Controls: Dual Use (10)
    • Cross border projects involving multiple EU countries
      • License application in EU country where contractual exporter is established
      • Indicate location of other goods/technologies in application
      • Consultation between EU country that receives application and other EU countries
        • Objections must be raised within 10 working days
        • May be extended in ‘exceptional cases’
        • Objections are binding: one EU country refuses no license granted!
        • No response: consent is deemed given
  • 18.
    • EU Dual Use Controls, Recast (?)
  • 19. EU Dual Use: Recast (1)
    • UN Security Council Resolution 1540, 2004
    • All States shall take and enforce effective measures to prevent proliferation of nuclear, chemical, or biological weapons, means of delivery, related materials
      • effective measures to account for and secure such items in production, use, storage or transport;
      • effective physical protection measures;
      • effective border controls and law enforcement efforts to detect, deter, prevent and combat, illicit trafficking and brokering
      • effective national export and trans-shipment controls, including controls of export, transit, trans-shipment and re-export and funds and related services such as finance and transport, end-user controls; appropriate criminal or civil penalties for violations
  • 20. EU Dual Use: Recast (2)
    • “ Peer review” of national implementation of Dual Use Reg. 133/2003, resulting in recommendations to Council (General Affairs and External Relations) in December 2004
    • Impact Assessment of certain proposed changes as from October 2005, results published in February 2006
    • Proposal: COM(2006) 828 final, December 2006 for Recast of Dual Use Reg.
    • Proposal: COM(2008) 854 final, December 2008 for 6 types of new General Community Licenses
    • 26 January 2009: Meeting DG Trade & exporters
  • 21. EU Dual Use: Recast (3)
    • Intangible Exports
      • Currently: Transmission of controlled technology to non-EU destination
      • Recast: T ransmission of software or technology or the provision of technical assistance, by electronic media, fax, telephone to a destination outside the EU, including making available in an electronic form such software, technology or technical assistance
      • Clarification Commission 26 January 2009:
        • Transit of software, technology or technical assistance on carrier medium can be subject to transit controls
        • “ Technical Assistance” does not include services provided by EU persons outside EU (covered by Joint Action CFSP 401/2000)
  • 22. EU Dual Use: Recast (1)
    • Brokering Controls
      • Brokering for Dual-Use currently not covered on EU level
      • “ Intermediation services”
        • Negotiating or arranging purchase, sale or supply of Annex I items from 3rd country to 3rd country
        • Buying, selling, supplying Annex I items from 3rd country to 3rd country
      • License is required if
        • Relevant person is notified by national authorities or himself has grounds to suspect WMD use (incl. for delivery means)
      • Clarification Commission 26 January 2009:
        • “ Intermediation Services” include typical brokering activities, but can also include transportation services and finance
  • 23. EU Dual Use: Recast (4)
    • Transit Controls
      • Currently Dual Use Reg. does not apply to transit
      • National authorities can intercept goods in transit for inspection
      • National authorities can confiscate such goods if:
        • There are reasonable grounds to suspect
        • Goods are or may be intended for illegal proliferation or to endanger international security
  • 24. EU Dual Use: Recast (5)
    • Community General Export Authorisation
      • Currently, most EU countries require registration under national rules
      • Proposal: registration as per Dual Use Regulation
        • May also be done 30 days after export
      • CGEA can not be applied when:
        • Exporter is notified of or aware of possible Military or WMD use
        • Goods are destined for free zone or free warehouse in of the 7 CGEA countries
      • Then: export license application shall be examined as if for individual specific license
  • 25. EU Dual Use: Recast (6)
    • Intra EU transfer of “sensitive” items
      • Currently, intra EU transfer of Annex IV items requires license
      • Proposal: Pre-transfer notification
        • By supplier to his national authorities, no later than 8 days in advance
          • Supplier must register with national authorities
          • Information to be provided as per Part II of Annex V
        • Shippers’ authorities will notify national authorities EU destination country
        • Transfer can be suspended if:
          • Incomplete pre-transfer notice/supplier not registered
          • Serious reasons to consider transfer against EU or national security interests
  • 26. EU Dual Use: Recast (7)
    • Licensing criteria:
      • Currently: obligations of EU countries under non-proliferation regimes, EU CFSP and/or other sanctions & embargoes (UN etc.)
      • Proposal: Exporters Internal Compliance Program = relevant factor
        • Global License applications
        • Intermediation Services applications
        • EU countries favour no connection between licensing & ICP
      • Sounding procedure for national “catch all”
        • National authorities must reply in 20 working days to query whether license is needed for exports of non-Annex I items
  • 27. EU Dual Use: Recast (8)
    • Recordkeeping
    • Currently: in accordance with the practice in force in the respective EU country
      • Commercial documents such as invoices, manifests and transport documents containing sufficient information to identify:
        • the description of the dual-use items
        • the quantity of the dual-use items
        • the name and address of the exporter and of the consignee
        • where known, the end-use and end-user of the dual-use items
    • Proposal: extends recordkeeping obligation for:
      • Intra-EU transfer of “sensitive” items
      • Intangible Exports & Intermediation Services
        • nature of the items, technology or software
        • the period during which the items were transferred/subject of provision of intermediation services
        • destination of the transfers.
    • Proposal: maintains period of 3 years after export
    • During 26 January 2009 conference, Commission re-emphasised current obligations to state ECCN and Controls on commercial documents
  • 28. EU Dual Use: Recast (9)
    • Criminal Penalties
      • Currently: obligation on EU countries take appropriate measures to ensure proper enforcement, in particular ‘effective, proportionate and dissuasive’ penalties
      • Proposal extends this to ensure criminal enforcement of serious offences
        • Intentional export violations for WMD & delivery means
        • Forgery of documents & omissions of information to obtain licenses
  • 29. EU Dual Use: Recast (10)
    • Comitology
      • Currently: informal group of EU country experts to discuss issues re. Application of Dual Use Reg. and exchange information
      • Proposal: Comitology for Dual Use Reg.
        • Limitations in respect of: Penalties (national criminal statutes) and Licensing for EU financed projects
        • Advantage: access to documentation, more transparancy
    • International Co-operation
      • Commission can negotiate with 3rd countries re. Mutual recognition of export controls
      • In particular to eliminate 3rd country licensing requirements for the reexport of dual-use items within the EU
        • Will the US give up re-export licensing under EAR ?
  • 30. EU Dual Use: Recast (10)
    • Comments sought from industry
      • Use of global licenses by EU countries/3rd countries as trade facilitation tool
      • Use of global licenses by US
      • General Comments on Recast (mid-March 2009)
  • 31. EU Dual Use: Recast (11)
    • Way forward
      • Uncertain (time frame ?)
      • EU countries appear to prefer national regulation
      • But: pressure from industry
        • Diverging ECCN interpretations
        • Diverging licensing criteria
        • Diverging time limits for licensing processing (not covered in Recast)
        • Enforcement (criminal) is national prerogative
  • 32.
    • EU Dual Use Controls, Implementation
  • 33. Implementation (1)
    • Common feature: Export of listed goods/technologies is prohibited
      • Listed: EU Dual Use Reg
        • May be supplemented on national level
        • May be supplemented by EU Sanctions regulations
        • “ Catch all” decisions on national level
      • Unless licensed by national administration
        • Categories of licenses are specified in EU Dual Use Reg
        • Additional (reporting and other) requirements may be imposed in licenses
      • Unlicensed export/non-compliance with license conditions commonly defined as criminal offence
  • 34. Implementation (2)
    • Transparency of administration varies substantially
      • Some EU countries provide published guidance (e.g. UK, Germany, France), some do not (e.g. Belgium, Italy)
        • Concrete licensing criteria
        • Controlled or “of concern” entities/individual lists
        • Published standardised license conditions (e.g. UK)
        • “ Catch all” additions to EU Dual Use control list may or may not be published
        • Some EU countries provide for institutionalised “control status” verification procedures (e.g. UK “rating enquiry”)
        • License application processing time varies between EU countries
    • Sophistication/experience of administration varies substantially
      • Very rough disctinction between EU countries with substantial defense industry and others
      • Informed Compliance attitude vs. Enforced Compliance attitude
      • Administration resources vary between EU countries
  • 35. Implementation (3)
    • Licensing approach varies
      • Some EU countries: emphasis on global licenses & ICP
      • Some EU countries: emphasis on individual specific licenses
      • 8 Member States have created "National General export authorisations“
        • 10 in force in Austria
        • 3 in force in France
        • 1 in force in Italy
        • 5 in force in Germany
        • 1 in Greece
        • 10 in Sweden
        • 1 in Netherlands
        • more than 10 in UK (OGEL, standardized conditions)
  • 36. Implementation (4)
    • Enforcement (currently, EU countries appear to prefer emphasis on criminal enforcement)
      • National administrations may have duty to report violations to Prosecuting Authorities
        • May impede voluntary disclosures
      • Prosecuting Authorities may not have discretion to refrain from prosecution
        • Transparancy varies between EU countries
          • Guidelines for prosecution not commonly established or publicly avialable
          • No public reporting on concrete cases in most EU countries
          • Where settlements occur, these are not commonly published
          • Where settlement is possible, no published guidelines for amounts/measures
      • In some EU countries, legal entities can not be prosecuted for export controls violations, only individuals
        • Legal representatives (appointed directors/officers) liable q.q. (e.g. Italy)
        • Company staff directly involved in relevant transactions (most EU countries)
  • 37.
    • Questions ?
  • 38. Thank you for your attention
    • Jasper Helder
    • Bird & Bird LLP
    • T + 31 70 353 89 24
    • M + 31 6 46 17 94 82
    • E [email_address]
    • W www.twobirds.com/customs