Export control; the European perspective

There is a lot happening in the world right now that can impact any company, especially in the area of export control and sanction compliance. From Trade Controls Compliance, I can support you in this.

Consider, for example, the sanctions against Russia. But also the current situation regarding Hamas (a terrorist organization). Or what about the limitations in semiconductor industry. Even if, for now, this is mainly from the United States to China. In this post, I will address the essence of export control. This with an emphasis on the European perspective. In it, I will refer to historical export control measures. And I provide a detailed overview of the current state of affairs, expected developments and useful useful links for your export control policy on dual-use classification and compliance due to a controlled portfolio.

What is export control?

Export control is a set of rules and regulations. These are designed to regulate the export of goods, technology and services from one country to another. The purpose of these control measures is to promote national security, prevent proliferation of weapons of mass destruction, protect human rights and preserve economic interests. Now this may seem like an abstract topic to many. But that is certainly not the case.

Historic export control measures

Export control is not a new phenomenon. It has a long history. Several countries have taken various measures in the past to restrict exports of sensitive goods and technologies. A well-known example is the CoCom (Coordinating Committee for Multilateral Export Controls), which was created during the Cold War to restrict exports of advanced technologies to countries behind the Iron Curtain. But even in the early Middle Ages there are examples where export control was used. Although it did not have this name at the time.

The current state of export controls in Europe

Export controls in Europe are regulated by both the European Union (EU) and individual member states. The EU has established a common export control policy. With the goal of protecting the internal market and ensuring the security of the EU and its allies. This policy includes a list of goods and technologies subject to export control measures. In addition, individual member states have their own national export control laws and agencies.

Current export control measures at the European level can be found in the recent EU dual-use regulation 2021/821, which replaced the previous regulation (428/2009) and has been in force since Sept. 9, 2021. Last updated May 25, 2023.

The EU consists of 27 member states and represents about 16% of world trade. Where the European regulation comes into force automatically and bindingly in all EU countries.

Dual-Use

The term “dual-use” refers to products that have both military and civilian applications. Many of these can be everyday products. The purpose of dual-use classification is to control the proliferation of these products. There is also a policy on military goods. That this one is even stricter seems obvious. But on military classification and impact, I will not go into detail in this article. Export control measures are determined after dual-use classification is performed. As a company, you are at great risk if you are not fully classified. Simply because you may not be aware that authorizations are required to trade your products or services.

The European dual-use regulation is based on several multilateral agreements, such as the Wassenaar Arrangement. As a result, they largely correspond to other parts of the world. The control measures resulting from the dual-use classification are focused on both your final physical products and your production assets, test equipment, software and related technology.

Export control authorizations

The European dual-use regulation lists in Annex I the products subject to export control procedures. Before these products are exported from the EU or made available (e.g., cloud services), an authorization or license is required.

For a limited part (Annex IV), an authorization is required even for intra-EU shipment. It is important to be aware that in addition to the European regulation, country-specific legislation may also apply. This may impact your service from another EU member state.

It is pertinent to highlight that in the latest updates, issues such as catch-all provisions on cyber surveillance, transit restrictions, impact of brokerage and technical assistance have been added. These may be relevant to you and thus deserve attention.

Dual-use classification

Assessing your entire business according to the latest regulations is no easy task. Many companies struggle to set this up. This is because the process requires a multidisciplinary team. It is often impossible to understand the full regulatory and legal language, as well as have a complete and detailed technical knowledge of all the products, software and technologies in your business. Regardless of whether they are self-designed or purchased.

The pooling of knowledge is therefore essential. On the one hand, the export control officer provides knowledge of regulations and classification methods, while contacts within and outside the company (suppliers) provide in-depth technical and product content knowledge. Together you will arrive at a classification. Then, the export control officer can further assist the company in establishing a compliance program, applying for authorizations and/or specific permits so that you can continue to do business. But now in control and in compliance with current laws.

Classification support

I can support and assist you through Trade Controls Compliance in the classification process. It is important to note that there are multiple methods and that an expert can not only manage the process, but must also provide employees with adequate training and background information. It is also important to look at the situation pragmatically and choose a method that suits your business. This determines success and the ability to set this up correctly in a short period of time.

Where possible and applicable, we like to make use of available tools. However, it is important to understand that there is no automatic classification tool (yet) that will take all the work off your hands. Even when AI applications, the current magic word, are advertised, they remain at best a tool that helps to some extent but not a solution. Also remember that as an exporter, you are always responsible and held liable for improper classification and failure to properly apply authorizations. You cannot then hide yourself behind an external tool.

Dual-use authorization

After completing your classification process, you will know if you actually have dual-use items in your enterprise. Although many companies expect this not to be the case, it turns out to be more common than expected.

Examples of dual-use products include certain ball bearings, various integrated circuits (intgrated circuits), specialty computers, telecommunications equipment, the use of encryption in virtually all of today’s IOT products, drones, sensors, cameras, navigation equipment, pumps, underwater vehicles, gas turbine engines and more.

Before you may export any of your items classified as dual-use, you must obtain an authorization from your government. In the Netherlands, this is done through the CDIU in Groningen. There are four types of export authorizations, ranging from an individual export authorization for one specific order to a global export authorization, a national and an EU general authorization. Taking as an example the UGEA 008, which authorizes at the EU level the export of certain encryption goods to various countries (30).

Internal Compliance Program

In many situations, your company may be required to have a government-approved ICP (internal compliance program) before certain authorizations are granted to you. You will also need to share various information (reports) with your government on a regular basis. As for the CPI, even if it is not mandatory, we consider it the ideal basis for your export control and sanction compliance policies and procedures in your company. We recommend that every company use this as a basis.

Impact of US controls

For many of you, the above will already be challenging. And you may have been putting this off with all its risks for far too long. Or you did get the job done and are therefore aware of the European and Dutch rules. But in addition, many European companies will not immediately expect to have to comply with U.S. regulations as well. Yet this is regularly applicable. And thus important for you to investigate. Because this is no free-for-all, and the impact of U.S. violations is huge.

Looking at dual-use classification under the export control classification numbers (ECCN) of the Export Administration Regulations (EAR) under implementation of the Bureau of Industry and Security (BIS), there are requirements if your products are subject to the EAR. This applies to all items in the U.S., as well as items of U.S. origin, products made containing U.S. controlled items, software, technology. This is usually based on some minimis level, but sometimes applies regardless of quantity (foreign direct product rule).

In this, U.S. export control laws can rightly be seen as “big brother is watching you. ” Consider that in practice it can mean that even a transaction from your warehouse in Rotterdam to a customer in Amsterdam may already require a U.S. license.

Expected developments

The export control landscape is constantly changing and new technologies and products are constantly being added. An important development is the increasing focus on emerging technologies, such as artificial intelligence (AI), cyber- and bio-technology, 3D and quantum.

These new technologies bring new challenges in export control. More stringent rules and regulations are expected to be implemented to address these challenges. For companies using new technologies such as AI, quantum or operating in growing industries such as cyber security, it is not only advisable to not only classify your current products, services, software and technology, but also to closely monitor developments to be prepared for changing legislation. It may even be useful to participate in the debate that will eventually lead to renewed legislation you must comply with.

Conclusion

In this post, I gave you an introduction on the essence of export controls, especially from a European perspective, without ignoring the impact from the United States, as it is very relevant for European companies. For many companies, this is a major challenge, and you are not alone. Whether you are still at the beginning and need to get started, or already have some knowledge but need help to simplify the process, I am happy to help.

This could possibly be in conjunction with other compliance issues or related to your customs classification (HS codes). These are regularly confused with each other. Not only are the classifications different, but their background, application and impact differ. Nevertheless, both are relevant and it is important that the classification requirements are in place. If both are missing, time can be saved by addressing them together, with my support if desired.

In support, I want to give you some crucial links that can help you get your classification in order. Please refer to the list below. If you have any questions after reading, would like to tune in to support options, or have other compliance-related questions, please feel free to contact me or read on at the Trade Controls Compliance website .

Useful links

• Central government topic “export control strategic goods”
• Customs website regarding Central Import and Export Office (CDIU)
• Link to handbook VGEM chapter 30.06.00 strategic goods
• Link to handbook VGEM chapter 30.09.00 regulations strategic services
• Link to strategic goods and services handbook
• European Union site mbt dual-use export controls
• Current Dutch version of Regulation (EU) 2021/821 (dual-use)
• BIS export administration regulations (EAR).
• 734.4 de minimis U.S. content

In short if s you want more information about export control, sanctions and compliance and what this means for you, please take Contact us.