The European Commission (EC) and the Finnish Presidency of the Council hosted the European Union 2019 Export Control Forum in Brussels. This year’s forum hosted a variety of guests including EU Member States, the European Parliament (EP), and key industry and civilian representatives. For the first time they were representatives from non-EU jurisdictions like Norway, the United States (US), Japan.
The Export Control Forum was an opportunity to exchange information about ongoing export control implementation in the EU, to identify new emerging and foundational technologies, such as artificial intelligence (AI), 5G, Industry 3.0 and to discuss on how to control them, to review the state of current legislation, and to discuss current geopolitical events that will effect export controls and legislation on a global scale.
The 2019 Export Control Forum was opened by Sandra Gallina, Deputy Director General for Trade of the European Commission, Klaus Buchner, Member of the European Parliament and Rapporteur for the Committee for International Trade and Teemu Sepponen, Chair of the Dual-Use Working Party of the Finnish Presidency of the EU.
The EP’s representative outlined the escalating human rights violations in countries like China, Turkey, Saudi Arabia, Iran and the necessity of more autonomous EU to protect human rights . This includes the need of clear definition of cyber security and harmonizing existing rules thoughout the Union. Being neutral does not protect the EU from emerging technologies and the EU must become an important rulemaker in this area.
The Council outlined the need to make licensing more clear and practical for business and to take into account the withdral of the United Kingdom from the EU, which will deprive the Union from a key actor in economic sanctions and export control.
The Commission informed the participates that year 2020 will be a decisive year for export control with new EU guidelines and launching pilot e-licensing initiatives. The current gap between the EU Parliament and Council’s positions is important but a first important step was made when the Council established its position and the negotiations can now take place at the trilogue. The Commission expreqssed its whish to pack the modernized DUI Regulation in the first half of 2020.
After the opening speeches, for each of the four sessions, the EU assembled a panel of experts that would present a topic and then host an open dialogue with the attending stakeholders. Here are th main issues discussed and information shared:
Export Control in 2019 : the State of Play
The first session to be held during the 2019 Export Control Forum focused on recent updates for export controls in the EU.
Mr. Stéphane Chardon, the Coordinator for Export Control, DG TRADE in the European Commission summarized the latest policy developments within the EU. The annual updates to the EU dual-use export control list in Annex I to Regulation (EC) No. 428/2009 published on 14 December 2019 in the OJEU and enter into force on 31 December 2019. The changes to the EU list are the result from amendments that were agreed following discussions at international level: WA, MTCR, Chemical weapons Convention, the Australian Group and Nuclear Suppliers Group). This includes changes, deletions, new entries and new decontrols.
Under its Brexit Contingency Plan, the EU Commisison published Regulation n° 2019/496 simplifying controls between UK and EU in cas of withdrawal without a deal. Thus, the Regulmation will enter into force only in case of a no-deal Brexit.
As to the DUI basic Regulation modernization, Mr. Chardon recalled that after EP’s position padopted on 17 January 2018 and this of the Council of 5 June 2019, the discussions are now held at trilogue level, the first ones took place on 10 October 2019 and 13 November 2019. The main points still under discussion include:
- “Human security dimension”: EU autonomous controls on DUI/cyber-surveillance technology to prevent human rights violations;
- Harmonization and simplification of controls: reduce administrative burden/enhance effectiveness of controls;
- Consistent implementation and enforcement: enhanced information exchange, interconnected IT systems, enforcement cooperation;
- Transparency and partnership with the private sector.
Mr. Chardon greated Commission’s efforts for more guidance with the publication of Commission Recommendation of 30 July 2019 including guidelines for the industry on internal compliance programs. A new 2019 Technical Expert Group was created, currently working on developing Guidelines for DUI research.
Finally, Mr. Chardon informed that the updated Information Notice on national measures (C304/3, 20 August 2016), as well as the Updated DUI-Customs Correlation table are to be expected early 2020.
BAFA presented the new list highlights by categories and namely Category 1 (1C001a), Category 2 (2B003 and 2B006b1), Category 3 (3A002d5 and 3D005), Category 4 (no changes), Category 5 (5A002a, Note 2c and Note 2j and 5D002a3), Category 6(6A005, 6A005a6, 6A108), Category 7 (7A103c), Category 8 (8A001), Category 9 (9A004g and 9A11) and Category 0 (no changes).
EU plans for 2020: what next?
The EU Commission is launching a pilot e-Licensing system in five countries (LV, IT, RO, EL, WA), which means full paperless process between economic exporters and licensing authorities. The e-Licesing concerns all types of licenses: export, transit, brokering, import with the idea to add others in future (ex. military items). The pilot members system will get on live in 2020 and will be open to all Member States (on a voluntary basis) in 2021. There is a planned integration of the e-Licensing system to the EU Customs Single Window CERTEX.
As mentioned, a Technical Export Group for guidelines in DUI research was created in 2019 and a Public consultation is expected in June 2020 and Guidelines at the end of 2020.
The legislative process for a modernization of EU export controls
The Council and the EP presented their recast priorities in the current negotiations, while otling they are still having divergences on cyber-surveillance, human rights, licencinf and enforcement.
The industry represented by Digital Europe outlined that current recast is already old for new and future challenges (Arab weakening, Terrorist attacks, Trade wars, 5G, AI and Industry 3.0). It is necessary to maintain a global foundation with legal certainty for exporters and authorities and avoid diversion from multilateral export control regimes. A multilateral approach is more effective than a unilateral approach as unilateral export controls would allow the supply of DUI to continue outside the EU.
The industry recalled that currently 76% of licences are individual licenses and only 8,7% EUGAs. There is a need to focus only on those exports that pose threat and additional EUGAs are crucial for the success of the European Industry 3.0. For example, licensing simplifications in form of “self-executed” EUGEAs will not only create a level playing field within the EU but also with third countries. At the same time credible control will be maintained and resources will be freed up for authorities to focus on the sensitive cases. In addition, the validity period should be 2 years. Further extension should be considered, as national authorities can always withdraw licenses when necessary.
As human rights concerns, the industry consideres that the proposed catch-all is too vague and create legal uncertainty for business and the result will be “overcompliance”. Cyber-surveillance is already controlled under sanctions regimes (ex. Syria, Iran, etc) which is a complementary tool that should not be forgotten.
Looking into the future: emerging technologies
All participants to this panel agrred that it is difficult to find the right balance between innovation and industry prosperity and control of sensitive items. This was outlined in particular by the US Department of Commerce which ramatic acceleration in technology development: only 10% are based on public funding. The US has different tools to control these emerging technologies, and in particular control on incoming investment and acquisitions (the role of CIFIUS), entity lists (ex. Huawei and other Chinese companies were recently liste), robust enforcement (criminal and administrative fees or deny exporting privileges, deemed exports, etc. Finally, as to foundational technology, a new Notice for Advanced Proposal is coming soon.
The SGDSN recalled that in response to emergence of new risks, on 17 may 2019 the EU adopted a Regulation regarding sanctions on cyber-surveillance. But the EU and Member States have other complementary tools in their arsenal, as schemes for protection of national scientific resources from technical thefts, control of sensitive acquisitions (involving R&D) and at EU level and the recently adopted Regulation on screening of foreign investments.
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