February 2010
Authors:
Vanessa C. Edwards
London vanessa.edwards@klgates.com
+44.(0)20.7360.8293
Robert V. Hadley
London robert.hadley@klgates.com
+44.(0)20.7360.8166
Olivia Lê Horovitz
Paris olivia.lehorovitz@klgates.com
+33.1.58.44.15.27
Dr. Christian Hullmann
Berlin christian.hullmann@klgates.com
+49.(0)30.220.029.140
Editor:
Jerome J. Zaucha
Washington, D.C. jerome.zaucha@klgates.com
+1.202.778.9013
K&L Gates includes lawyers practicing out of 35 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market participants and public sector entities.
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Some in the global exporting community traditionally have viewed non-U.S. export control laws as mere multilateral extensions of U.S. controls and operated under the belief that any type of activity not restricted by the U.S. is permitted in any other jurisdiction. Even if previously reasonable under certain circumstances, this view has become an increasingly unreliable prescription for export controls compliance.
In particular, export controls in the EU have for some time reflected and increasingly reflect the implementation of EU and member-state formulated, as well as multilateral, export controls policies. The new EU export controls on dual-use items described below, although principally implementing UN policies, are consistent with this trend and, indeed, include the imposition of certain types of controls that may be considered to go beyond those implemented by the U.S.
Exports from the EU of dual-use items have been regulated since 1994. Dual-use items are items, including software and technology, which can be used for both civil and military purposes. The scope of the EU legislation mandating the regulation of certain exports has recently been amended and extended, with potentially significant implications for exporters of numerous categories of goods.
Regulation 428/2009, which sets up the current EU regime for the control of exports, transfer, brokering and transit of dual-use items, entered into force on 27 August
2009, replacing Regulation 1334/2000. Regulations are directly applicable in all 27
Member States of the EU; the new legislation will accordingly apply from that date throughout the EU.
The 1994 and 2000 Regulations imposed controls on exports of listed dual-use items.
The 2009 Regulation, implementing a UN Security Council Resolution adopted in
2004, extends those controls to the transfer within the EU, brokering and transit of such items.
The definition of dual-use items (set out above) remains unchanged, and continues to include all goods which can be used for both non-explosive uses and assisting in any way in the manufacture of nuclear weapons or other nuclear explosive devices.
The controls required by the Regulation are administered at the national level. In the
UK, the competent national authority is the Export Control Organisation, part of the
Department for Business, Innovation and Skills; in Germany, the Bundesamt für
Wirtschaft und Ausfuhrkontrolle (BAFA); and in France, the Direction Générale des
Douanes et Droits Indirects (General Department for Customs and Indirect Duties), part of the Ministère du Budget (Budget Ministry).

The principal requirements for authorisation for the export of dual-use items from, and in certain circumstances within, the EU remain unchanged from the 2000 Regulation.
Thus authorisation is required for the export of dualuse items listed in Annex I to the Regulation. The list implements internationally agreed dual-use controls including the Wassenaar Arrangement, the
Missile Technology Control Regime, the Nuclear
Suppliers’ Group, the Australia Group and the
Chemical Weapons Convention and the detail has been updated to integrate recent decisions taken in these fora. A summary of the changes may be found via a link on the European Commission’s Trade
Directorate General website at http://ec.europa.eu/trade/creatingopportunities/economic-sectors/industrialgoods/dual-use/ .
Authorisation is also required for the export from the
EU of non-listed dual-use items if the exporter is informed by the relevant national authority that the items are or may be intended for use in connection with chemical, biological or nuclear weapons
(“WMD use”), military end-use if the destination is subject to an EU, OECD or UN arms embargo, or as parts of military items exported from that Member
State without authorisation. An exporter who is aware that dual-use items are intended for any such use remains subject to the obligation to notify his national authority, which will decide whether an authorisation is required. It is clear from the legislation that the requirement of awareness is subjective, i.e. it is a question of whether an exporter is actually aware rather than being triggered by the existence of grounds for suspicion.
Finally, Member States may require authorisation for the export from the EU of non-listed dual-use items if the exporter has grounds for suspecting that they are or may be intended for WMD use or for reasons of public security or human rights considerations.
The most significant change introduced in the 2009
Regulation is the introduction of an authorisation requirement for brokering services, defined as (a) the negotiation or arrangement of transactions for the purchase, sale or supply of dual-use items from third (i.e., non-EU) country to third country; or (b) the actual selling or buying of dual-use items located in a third country for transfer to another third country.
Under the 2009 Regulation, authorisation is required for brokering listed dual-use items if the broker is informed by the national authority of the
Member State in which he is resident or established that items are or may be intended for WMD use.
Again if a broker is aware that some or all of the listed dual-use items for which he proposes brokering services are intended for such use, he must notify that national authority, which will decide whether an authorisation is required.
Member States may extend this requirement to nonlisted dual-use items for WMD use and to dual-use items with a military end-use if the destination is subject to an arms embargo, and may require authorisation for non-listed dual-use items if the broker has grounds for suspecting that they are or may be intended for WMD use. For the moment, the UK and France have decided not to impose these additional controls; in Germany, non-listed dual-use items require an authorisation if the destination is Cuba, Syria or an embargoed country.
Member States may prohibit, or require authorisation for, the transit through the EU of listed dual-use items which are not formally imported into the EU and which are or may be used in whole or part for WMD use, and may extend the prohibition to non-listed dual-use items for WMD use and dualuse items with a military end-use if the destination is subject to an arms embargo. In the UK, there is no requirement for a transit or transhipment licence for most dual-use goods. However, where the goods and/or the destination country generate a sufficient degree of risk a licence will be required.
The UK requires a licence for goods destined for
Iran or North Korea. In Germany, transit goods are subject to customs examination. If there are indications of a risk regarding any dual-use items the customs authorities may suspend the transit and inform BAFA, which will then decide if the transit is to be prohibited or requires authorisation. In
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France, authorisation is required for the transit of military and civilian explosive items.
The 2009 Regulation retains the system of a
Community General Export Authorisation for certain exports set out in Annex II; authorisations for other exports and for brokering services are to be granted at the national level. Member States are required for the first time to prescribe a period of time within which requests for authorisation will be processed.
In an important innovation, the 2009 Regulation requires national authorities to notify other EU national authorities and the European Commission whenever they refuse, annul, suspend, substantially limit or revoke an export or brokering authorisation or prohibit a transit of listed dual-use items. The
Commission is to set up a secure database of such notifications. Before granting an export, brokering or transit authorisation, national authorities must check the database to see whether an authorisation has been denied in another Member State for an essentially identical transaction.
Another important change is the requirement in the
2009 Regulation that national authorities when assessing an application for a global export authorisation (covering the export of several items to several countries) take into consideration the exporter’s procedures to ensure compliance with the
Regulation and the terms and conditions of the authorisation. It is essential, therefore, that exporters wishing to benefit from global authorisations ensure that they have a strong compliance programme in place.
Penalties for infringement of the Regulation are determined by each Member State, but must be
“effective, proportionate and dissuasive.” This means that activities which were previously not regulated, such as brokering and transit of certain dual-use items, will now be subject to penalties if conducted without proper authorisation.
In the UK, for example, it is now a criminal offence to undertake a brokering service without a valid licence. Offenders may be fined and/or imprisoned.
In addition, making false statements in connection with a licence application is also a criminal offence.
The maximum penalty for the most serious offences is 10 years’ imprisonment and an unlimited fine. In
France, the export of a dual-use item without a valid licence is also a criminal offence and is sanctioned by three years’ imprisonment, a fine (with a maximum of twice the value of the unlawfully exported goods) and the confiscation of the goods concerned. The French government is currently drafting a new bill against weapons proliferation which could, if approved, increase the maximum term of imprisonment to five years. In Germany, undertaking a brokering service without a licence is a regulatory offence and offenders may be punished by fines up to €500,000; other serious violations of export authorisation requirements may in addition be punished by up to five years’ imprisonment.
The new Regulation significantly extends the categories of transactions for which authorisation is required as well as imposes additional requirements as to compliance. It is accordingly imperative that companies with operations in EU Member States, particularly those which operate in the areas of brokering and/or transit of dual-use items, promptly review their procedures to ensure that authorisations are obtained where necessary.
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