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New audience for ‘military two-step’
February 2007
K. Adaman., International Trade Today
Goods and technology developed for civilian purposes that are also suitable for military applications are dual-use items. These are not weapons as such, and they are traded for legitimate civilian purposes. In accordance with the provisions of the international export control regimes and the relevant international disarmament and non-proliferation treaties to which they are committed, the EU and its member states control exports of dual-use items.Within the EU, Council Regulation (EC) 1334/2000 is the legal framework governing the control of exports of dual-use items. However, last year this Regulation was amended by Council Regulation (EC) 394/2006, which came into force on 11 April.
The basic principle of the EU legal framework governing the control of exports of dual-use items is that the items listed in the main annex to the Regulation cannot leave the custom territory of the EU without an export authorisation granted by the authorities. Furthermore, intangible transfers of technology are also subject to export control authorisations. Accordingly, the following four types of licences are available to exporters in the EU:
- the Community General Export Authorisation, which covers most exports to Australia Canada, Japan, New Zealand, Norway, Switzerland and the United States
- National General Export Authorisations, which do not exist in all member states but are published in the member states’ official journals if in force
- global authorisations for a specific exporter in respect of a type or category of dual-use items that may be valid for exports to one or more specified countries
- individual licences that generally cover one exporter and one transaction to one end-user.
Annex I to the Regulation lists the controlled items and is divided into 10 categories. Each category is further divided into the following five subsets: equipment; test and inspection equipment; materials; software; and technologies. The European Commission provides a non-legally binding, non-exhaustive table linking TARIC codes and Annex I. Other annexes to the Regulation list items excluded from Community General Export Authorisation and items that are controlled within the single market.
At national level and under specific circumstances, member states can control dual-use items in addition to those listed in Annex I. This is particularly true for exports to countries subject to arms embargoes or given a suspicion that the end use of the items will be in the development or production of weapons of mass destruction (WMDs). The Commission and Council maintain an indicative, non-exhaustive list of third countries subject to restrictions at EU level. However, this information should always be supplemented with information from the member states.
In addition to its role under the Regulation, the Commission participates in international export control regimes in a variety of capacities, whether as a member, an observer or as part of the EU presidency’s delegation. The Commission has the sole right of initiative to amend the Regulation. It also chairs the Coordination Group established by Article 18 of the Regulation. This body enables member states to address implementation issues and to talk to industry.
In 2005, the Commission launched a study on possible amendments to the Regulation. On the basis of the information gathered in the study, and impact assessments and discussions with the member states and industry representatives, the Commission will prepare its proposals and recommendations to the Council.
The study considered options for change focused on two main areas: (i) Community-wide regulatory harmonisation; and (ii) compliance with UN Security Council Resolution 1540 on WMDs (UNSCR 1540).
The need for greater harmonisation of an export regime across the EU was emphasised by the responses of industry to a survey launched by the assessment. While the parties involved judged the EU system relatively favourably, they expressed frustration at the inconsistencies between member states that made their business more difficult. Because member states impose different licensing requirements on certain items and each follows different procedures, industry is faced with the challenge of understanding and interpreting several complex regulatory systems.
UNSCR 1540 has imposed tough new obligations on countries to control more rigorously the transfer of WMDs. A number of these obligations exceed current EU requirements under the Regulation. Therefore, the second goal of the impact assessment was to establish how best to reconcile the demands of UNSCR 1540 with the EU legal framework governing the control of exports of dual-use items (by amending the latter to incorporate the former).
These two considerations led to six specific impact assessments, each including a number of proposals for change. An overview of these elements is provided below:
TRANSPARENCY
Section B of the study considered the transparency of the existing legal and administrative procedures in the 25 member states. Proposals for improvement centred on developing a comprehensive Commission website on which a standard body of information relating to all member states would be found.
HARMONISATION
Section C of the study considered the possibility of harmonising the forms used across the EU to obtain individual and global licences. It was argued that this would be an essential step in providing clarity for exporters and improving their ability to deal with controls efficiently. Other proposals included imposing a mandatory industry-wide Internal Compliance Procedure obligation, placing the onus of regulatory compliance on the exporter.
TRANSIT
Section D of the study considered options for improving the control of dual-use items in transit or transhipment within the EU customs territory, in order to implement UNSCR 1540. The proposals were based on the principle of better coordination and communication between member states, including the sharing of information on goods in transit. There was also a proposal to broaden the scope of the end use provision, so that dual-use items in transit could be detained on the basis of a suspicion of WMD end use.
SANCTIONING
Section E of the study considered possible means by which to sanction the illicit brokering of dual-use items by EU citizens, specifically where it could contribute to the proliferation of WMDs and their means of delivery. The proposed scope of such sanctions would be extended to any person operating within the territory of the EU. A key feature would be the introduction of ‘Red Flag’ guidelines for brokers and a list of end uses of concern.
CATCH-ALL CLAUSE
Section F of the study considered Customs enforcement of harmonised implementation of the Catch-All Clause (Article 4 of the Regulation). The emphasis would be on providing a reliable, standard system to add certainty for exporters, while at the same time allowing member states the flexibility necessary to vet suspicious dual-use exports. Again, a proposal was made to shift the focus of Customs authorities away from the goods themselves and towards the end use of the goods, in particular where there was any concern that the end use might involve WMDs.
CONCLUSION
The Commission promotes regular dialogue with industry and has held meetings on the outcome of the Impact Assessment Study. These efforts are aimed at receiving feedback from exporters before preparing a Communication, expected to be released soon, on possible reform of the EU legal framework governing the control of exports of dual-use items.
While there is no suggestion that all of the proposals in the impact assessment study will be adopted, the study hints at the tenor of any future amendments. The focus is likely to be on greater harmonisation, increased cooperation and further restrictions on items with a possible WMD end use. Thus, industry must remain involved in the dialogue established with the authorities to ensure that any proposed changes are as favourable as possible from its point of view.
