Implications of new EU Dual-Use Regulation
Companies across industries and sectors that trade internationally may be confronted with export controls. Navigating through export control regulations is complex, while the consequences of non-compliance can be far-reaching: from fines and supply chain problems to reputational damage and even criminal prosecution.
On 9 September 2021, the recast of the EU Dual-Use Regulation (EC) No. 2021/821 (“Dual-Use Regulation”) entered into force, replacing former Regulation (EC) No 428/2009. This recast forms a fundamental overhaul of the European Union's (“EU”) export control regime. Knowledge about the modernised rulebook is therefore of elementary importance. This article introduces the features of the new export control regime that we believe are the most relevant to internationally operating businesses.
The Dual-Use Regulation regulates the export of ‘dual-use items’, i.e. goods, software and technology that can be used for both civilian and military purposes. The EU controls trade in dual-use items because their illicit use can pose various risks to international peace and security. These include the development of weapons of mass destruction, acts of terrorism and human rights violations. To minimise these risks, the EU strictly regulates exports, transit, brokering and technical assistance of dual-use items.
Apply for an export license
In general, the Dual-Use Regulation provides for the free circulation of dual-use items within the EU, while controlling the export of dual-use items outside the EU. In practice, this means companies require to apply for an export licence for all dual-use items listed in Annex I to the Dual-Use Regulation that are exported to non-EU countries. As an exporter, you can apply for an individual, a global, a national general or a European general export licence. In the Netherlands, the authority responsible for the processing of such license applications is the Central Licensing Office of the Dutch Tax Authority (the “CDIU”). The renewed Dual-Use Regulation sets out new assessment criteria for licence authorisations. In addition, several definitions are broadened (e.g. “broker”, “technical assistance”) and new requirements for internal compliance programs are introduced.
The recast of the Dual-Use Regulation seeks to strike a balance between ensuring global security and respect for human rights while maintaining a level playing field and enabling legitimate trade. In this context, the Dual-Use Regulation, inter alia, introduced:
- New ‘catch-all’ controls to prevent acts of terrorism and human rights violations: allowing EU Member States to introduce optional catch-all controls for non-listed items for reasons of public security, including the prevention of acts of terrorism, or for human rights considerations. Catch-all clauses allow national authorities to provide an authorisation requirement for the export of dual-use items that are not listed in Annex I of the Dual-Use Regulation.
- New controls on cyber-surveillance items: exporters of cyber-surveillance items have a duty to inform the competent authorities, if they are aware of non-listed cyber-surveillance items that are or may be used in connection with internal repression or serious human rights violations. The competent authority will then decide whether the export concerned will be subject to any restrictions.
- Extended controls on technical assistance: widening the definition of technical assistance to cover support related to repairs, development, manufacture, assembly, testing, maintenance, or technical service, e.g. instruction, transmission of working knowledge or consulting services. Accordingly, providing technical assistance regarding certain dual-use items (as set out in paragraph E of Annex I) requires an authorisation.
Impact on business
While the renewed Dual-Use Regulation indeed extends the scope of catch-all controls and introduces new controls on the export of cyber-surveillance, the new rulebook also includes trade facilitating measures. The regulation, for example, includes a general authorisation for intra-group transmission of software and technology under specific conditions and the validity period of export authorisations is harmonised to a maximum of two years, creating more certainty for businesses. In this way, costs to comply with these new rules will be quite balanced.
 Regulation (EU) 2021/821 of the European Parliament and of the Council setting up a Union regime for the controls of exports, brokering, technical assistance, transit and transfer of dual-use items (Recast).
 Regulation (EU) 428/2009 of the European Parliament and of the Council setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items
 To provide an example: a fire retardant from the construction industry can also be used as a raw material for poison gas production.
 In addition to Annex I, an export licence shall also be required for intra-Union transfers of dual-use items listed in Annex IV of the Dual-Use Regulation.
 Article 9 (1), Dual-Use Regulation.
 Article 5 (1), Dual-Use Regulation.
 Article 8, Dual-Use Regulation.
 BenninkAmar Advocaten, Dual-Use Regulation Recast and implications for businesses, 9 September 2021, online available at: https://batradelaw.com/nl/dual-use-regulation-recast-and-implications-for-businesses
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Source: BenninkAmar Advocaten
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