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

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C5 Export Controls 10 & 11 March 2009 Final London

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