c5 export controls 10 & 11 march 2009 final london

What you need to know about EU Export Controls now

C5 3rd Annual Export Controls ConferenceLondon, 10 & 11 March 2009

Jasper Helder, partner Trade & CustomsBird & Bird LLP

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Agenda

EU legislative frameworkDual Use

Current requirements

Recast (?)

Implementation

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EU Overview

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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

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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)

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EU Export Controls Overview

Dual Use Goods & TechnologyCommon 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

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EU Dual Use Controls, Current Status

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EU Export Controls: Dual Use (1)

Common regime: Regulation (EC) 1334/2000

Lastly amended by Regulation (EC) 1167/2008Annex 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

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EU Regulation is not exhaustive

National legislation EU Member StatesControl 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

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Exports of Goods subject to licensing (1)

Export of “dual-use” goods/ technology to non-EU countriesAnnex 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

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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


National “Catch All”: Prior Irregular Exports Items for use in products exported without or contrary to prior export license


Exporter must notify “catch all” circumstances to authorities

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National Catch-All (article 5)Prohibition of export or licensing requirement for non-Annex I goods/technologies

Public security

Human rights


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Intra-EU transfers of Goods subject to licensing

Certain “sensitive” goods and technologyAnnex 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

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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

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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)

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No license required for intangible exports of Technology

Data in the Public DomainMade available without further dessimination restrictions

Basic Scientific ResearchExperimental, theoretical, not primarily directed towards specific objective/aim

Minimum necessary information for patent applications

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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 daysMay be extended in ‘exceptional cases’Objections are binding: one EU country refuses no license granted!No response: consent is deemed given

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EU Dual Use Controls, Recast (?)

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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

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“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

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Intangible Exports

Currently: Transmission of controlled technology to non-EU destination

Recast: Transmission 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)

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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 countryBuying, selling, supplying Annex I items from 3rd country to 3rd country

License is required ifRelevant 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

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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

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Community General Export Authorisation

Currently, most EU countries require registration under national rules

Proposal: registration as per Dual Use RegulationMay 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

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Intra EU transfer of “sensitive” items

Currently, intra EU transfer of Annex IV items requires license

Proposal: Pre-transfer notificationBy 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

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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 factorGlobal 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

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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 itemsthe quantity of the dual-use itemsthe name and address of the exporter and of the consigneewhere known, the end-use and end-user of the dual-use items

Proposal: extends recordkeeping obligation for:Intra-EU transfer of “sensitive” itemsIntangible 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

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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

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ComitologyCurrently: 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-operationCommission 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 ?

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Comments sought from industryUse 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)

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Way forwardUncertain (time frame ?)

EU countries appear to prefer national regulation

But: pressure from industryDiverging ECCN interpretations

Diverging licensing criteria

Diverging time limits for licensing processing (not covered in Recast)

Enforcement (criminal) is national prerogative

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EU Dual Use Controls, Implementation

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Implementation (1)

Common feature: Export of listed goods/technologies is prohibited

Listed: EU Dual Use RegMay be supplemented on national level

May be supplemented by EU Sanctions regulations

“Catch all” decisions on national level

Unless licensed by national administrationCategories 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

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Implementation (2)

Transparency of administration varies substantiallySome 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 listsPublished standardised license conditions (e.g. UK)“Catch all” additions to EU Dual Use control list may or may not be publishedSome 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 substantiallyVery rough disctinction between EU countries with substantial defense industry and othersInformed Compliance attitude vs. Enforced Compliance attitudeAdministration resources vary between EU countries

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Implementation (3)

Licensing approach variesSome 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)

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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 prosecutionTransparancy varies between EU countries

Guidelines for prosecution not commonly established or publicly avialableNo public reporting on concrete cases in most EU countriesWhere settlements occur, these are not commonly publishedWhere 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)

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Questions ?

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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 protected]

W www.twobirds.com/customs

c5 export controls 10 & 11 march 2009 final london

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