Außenwirtschafts-, Handels-
Position und Entwicklungspolitik
Amendment to the EU Dual-use Regulation
BDI supports the harmonisation and simplification of export controls
Dokumenten Nr.
within the EU, but regrets that the Recast Regulation proposed by the D 0115 - E
Commission misses key opportunities for reducing the bureaucracy asso- Datum
7. März 2007
ciated with export controls. On the one hand, the proposed wording con- Seite
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tains some positive approaches such as the abolition of intra-community
controls for trade in dual-use items. On the other hand, new opportunities
for control are being introduced whose concrete effects on industry are
hardly foreseeable today. BDI is particularly concerned about suggestions
calling for the introduction of authorisation requirements for intermedia-
tion services ("brokering"). Furthermore, it is highly doubtful whether a
number of new registration and documentation requirements contained in
the proposal are absolutely necessary in order to effectively prevent un-
desired exports. Finally, the Recast Regulation presented by the Commis-
sion – especially the German translation – contains numerous unclear
points and technical flaws. One such problem concerns the title, which
does not adequately portray the full spectrum of issues affected by the
Regulation; further examples include the definitions of terms and numer-
ous other provisions contained in the Regulation. Therefore, the wording
of the Regulation must be the subject of intensive discussions over the
coming months in order to avoid legal uncertainty for the parties applying
the Regulation.
Specifically, BDI has the following comments with respect to the modifi-
Bundesverband der
cations proposed by the Commission: Deutschen Industrie e.V.
Mitgliedsverband der UNICE
1. Intermediation services (Article 2 lit. e, Article 3 paragraph 3, Ar-
Telekontakte
ticle 16 paragraph 1) T: 030 2028-1518
In view of UN Security Council Resolution 1540, the Commission con- F: 030 2028-2518
siders it appropriate to control intermediation services regarding dual use Internet
http://www.bdi.eu
items in certain instances. Its structure is similar – but not identical – to
E-Mail
the structure foreseen in Article 4 of the dual-use Regulation:
H.Willems@bdi.eu
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Intermediation services are to require an authorisation if the company has
grounds for suspecting that the items concerned are associated with the il-
legal proliferation of weapons of mass destruction, or if the authorities
have informed the company accordingly.
The proposed Regulation has a variety of critical aspects. German indus-
try is generally concerned when political resolutions are adopted as bind-
ing legal acts without sufficient deliberation, since political objectives
cannot always be transformed easily into well-defined rules of conduct.
In the context of intermediation services, the practicability and efficiency
of the proposed controls are very much in doubt.
In defining intermediation services, the term "negotiating or arranging"
transactions (Article 2 lit. e, first bullet point) is ambiguous and must be
specified more narrowly. Only those intermediation services require con-
trol and can in practice be controlled that are agreed in the context of a
legal transaction (for instance, in return for payment) and that can be
compared to brokering. Under no circumstances should mere information
or advice become subject to authorisation.
The inclusion of commercial transactions in Article 2 (e), second bullet
point, as "intermediation" comes as surprise for the addressees of the
Regulation. In practice, the affected buyers and sellers will be unaware that
the stated activities are defined as "intermediation services" and as such are
subject to certain obligations. This is an area where the Regulation must
be made sufficiently clear. Another issue causing confusion is that inter-
mediaries are also covered by the term "exporter" in Article 2 (c) (iii).
Finally, the extension of the definition of the term "export" in Arti-
cle 2 (b) (iv) must be deleted without substitution, since this point gives the
(presumably unintended) impression that each intermediation activity with
respect to the items listed in Annex I requires an authorisation in accor-
dance with Article 3 paragraph 1, i.e. not only in the instances according to
Article 3 paragraph 3.
With respect to the contents of the authorisation requirement, we believe
it is problematic that the connection to weapons of mass destruction or
their means of delivery establishing the authorisation requirement is not
precisely defined. A "violation of relevant international treaties and obli-
gations" is not immediately apparent to the party applying the Regulation
in the individual instance, and must therefore not establish a requirement
to obtain an authorisation. What is required is a clearly identifiable refer-
ence to the production, development, proliferation or use of nuclear, bio-
logical or chemical weapons.
An authorisation requirement in instances in which the company merely
has "grounds for suspecting" critical uses is much too broad. This am-
biguous term leads to incalculable risks for companies, since the exis-
tence of "grounds for suspecting" is very difficult to ascertain using ob-
jective criteria. Especially in the area of "intermediation services", the es-
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tablishment of an authorisation requirement can at best be tied to the exis-
tence of full knowledge (i.e. if the exporter “is aware” of such use).
In view of the Regulation’s breadth of scope and lack of clarity, we ob-
ject to the notification requirement even in the case where merely the in-
tention exists to provide intermediation services (Article 16 paragraph 1).
The requirement concerning the keeping of registers concerning the provi-
sion of intermediary services (Article 16 paragraph 2 (iii)) is particularly
unrealistic and therefore unacceptable in our view. According to the word-
ing currently proposed, both provisions incidentally not only apply to in-
termediary services relating to items with potential applications in the con-
text of weapons of mass destruction, but to all items listed in Annex I. Also
in this regard, there is an urgent need to amend the proposed text. (Regard-
ing the requirements for intra-company procedures, cp. item no. 7)
2. Controls on transit (Article 2 lit. g, Article 3 paragraph 4)
This point also relates to the UN Security Council Resolution 1540. Con-
trols on transit concern items that are initially imported into the territory
of the European Community, but are not cleared through customs, and are
subsequently transported through the territory of the European Commu-
nity with the objective of exporting them to a third country. In the indi-
vidual instance, the competent authorities would be able to stop transit
through the territory of the European Community and, where applicable,
take possession of the items if they have "grounds for suspecting" that the
items are or may be intended for illegal proliferation or attempts at inter-
national security in violation of international treaties and obligations.
In principle, we have no concerns against the planned provision as long
as it is applied within reason. However, the conditions attached to such an
intervention are too vague, and the possibility to intervene with respect to
all items contained in Annex I is very comprehensive. In any case, high
standards must be applied to the "grounds for suspecting" intended illegal
use. In order to be able to take possession of items, reliable evidence
must be presented. Moreover, it is doubtful whether the competent au-
thorities (typically, the customs authorities) possess the technical and le-
gal skill necessary for deciding when international treaties and obliga-
tions are being violated, in particular because this can easily be contro-
versial in the specific instance. Finally, the issue of liability in cases of
unjustified interventions arises. Overall, the planned powers appear too
vague and prone to potential abuse.
3. Notification in lieu of intra-community authorisation requirements
concerning items listed in Annex V (Article 16 paragraph 1 and para-
graph 2 (ii), Article 25)
The intra–community authorisation requirements for the transfer of items
listed in Annex V (formerly IV) of the Dual–use Regulation are to be
abolished. Instead, such transfers are to be reported in advance. Compa-
nies intending to carry out intra-community transfers are supposed to reg-
ister and document their transfers (Article 16).
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In principle, industry welcomes the abolition of the authorisation re-
quirement for the intra-community movement of goods, since this re-
quirement conflicts with the free movement of goods guaranteed under
primary law. Since recently even the liberalisation of the Single Market
for arms has been the subject of discussions, any limitation of the move-
ment of dual–use items within the Community appears anachronistic.
However, the issue arises whether the registration and prior notification
of such supplies as currently planned does in fact facilitate the intra-
community movement of goods. Therefore, it should be examined to
which extent controls are actually required for the items listed in An-
nex V, and whether the planned notification procedure might be dropped,
at least with respect to certain items.
To the extent that a notification procedure for transfers is introduced, it
must be ensured that the requirements imposed on the exporter for notifica-
tion do not exceed those contained in the current authorisation procedure.
Under no circumstances should the companies concerned be placed in a
worse position. For instance, the planned obligation to pre-notify such
transfers eight working days in advance could cause problems in cases in
which transfer authorisations currently exist that are independent of indi-
vidual shipments (for example, pre-approved transfers up to a maximum
amount). Therefore, it must be ensured that notifications that are inde-
pendent of individual shipments remain possible. Otherwise, the proposed
provision would in the described instances lead to more bureaucracy for
the concerned parties and to additional waiting times in the case of sup-
plies that are required in the short term. Also, the possibility of suspending
transfers provided in Article 25 paragraph 3 would lead to an unreasonable
degree of legal uncertainty with respect to the pre-approved transfers that
are currently possible. Such disadvantages compared to the current legal
situation must be avoided under all circumstances.
Industry welcomes the planned abolition of the current Article 21 para-
graph 2 that contains the possibility of additional authorisation obligations
for transfers at the national level.
4. Control of intangible technology transfer (Article 2 lit. b (iii), Arti-
cle 16 paragraph 2 (iii))
Unfortunately, the industry proposal to exempt the exchange of informa-
tion between various sites of the same company or within groups of com-
panies from the authorisation requirement was not taken into account. We
again wish to point out that the control of such processes creates artificial
barriers within company and corporate structures. Here, German industry
sees an urgent requirement for creating exemptions and/or general export
authorisations. However, this consideration is addressed neither in the
Recast Regulation nor in the Commission Communication.
We believe that keeping registers concerning the transfer of intangible
technology (cp. Article 16 paragraph 2 (iii)) represents an unrealistic re-
quirement that we emphatically reject. In practice – especially in the area
of research and development – it is not possible to comply with such
comprehensive documentation requirements.
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5. Catch–all provision (Article 4 Dual–use Regulation)
The efficiency of the so-called catch-all provision is to be increased by
way of the Member States improving their exchange of information about
measures pursuant to Article 4. The objective is to achieve a similar level
of control among Member States and to keep companies in other coun-
tries from applying for authorisations if they do not obtain an authorisa-
tion in their own Member State (also cp. Article 9 paragraphs 2 and 3).
While this desire is to be welcomed in principle, the intensified exchange
of information must under no circumstances lead to an increase in the
time required for processing applications. German industry is concerned
that enhanced information and consultation obligations among Member
States will result in additional burdens for the authorities to the detriment
of applicants. Also, the data protection interests of the affected companies
must be safeguarded (also cf. item 9). Finally, it must be ensured that
abuses of notifications concerning denials by individual Member States
cannot occur – as it has occasionally happened in the past.
In our view, the wording contained in Article 4 paragraph 6 appears
highly questionable. Any universally applicable obligation can only be
established on the basis of laws or general administrative acts. However,
a legal basis on the part of the Member States for applying authorisation
requirements concerning specifically listed end-users/consignees, as im-
plied by this provision, does not exist. We object to any additional re-
quirements for general export authorisations that are to be based on Arti-
cle 4 paragraph 6.
Furthermore, German industry proposes not to subject goods used for de-
tecting or identifying chemical, biological and nuclear weapons to a general
authorisation requirement. Goods used for detection and identification do
not require controls as stringent as those contained in the current version of
Article 4 (with the associated consequences for general authorisations),
unless they pertain to the development, production or use of weapons of
mass destruction. However, these applications are already covered by the
other variants of Article 4 paragraph 1. Other applications, for example the
identification of certain bacteria in food, are unproblematic with respect to
export control policy. We suggest stipulating an appropriate exemption in
this regard in Article 4 paragraph 1. Incidentally, a catch-all provision cor-
responding to Article 4 paragraph 1 also does not exist under US law.
6. General export authorisations (Article 6)
German industry regrets that the Commission, despite its recognition of
the need for further general export authorisations, has not presented any
proposal in this regard. From the industry's perspective, additional Euro-
pean general export authorisations would be desirable for
small amounts or samples (de–minimis exports),
repairs and spare parts pertaining to goods that were previously le-
gally exported,
the exchange of information within trans-national corporate alli-
ances as well as
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the delivery of less sensitive goods to less sensitive countries (such 6 von 9
as states that participate in the respective export control regimes).
Article 6 paragraph 1 is merely intended to harmonise the administration
of the existing EU 001 general export authorisation in the individual
Member States. We are concerned about the fact that the planned registra-
tion notifications are to be passed on to all other Member States and the
Commission. The legitimate data protection interests of the affected
companies must be safeguarded. We cannot recognise the benefits that
the Commission or other Member States would derive from passing on
the actual notifications of specific companies.
The requirement according to which national general export authorisations
must not contain items or countries that are the subject of denials in any
Member State (Article 6 paragraph 3 a) must be rejected. This would inevi-
tably lead to a situation in which the scope of application of general export
authorisations would quickly be reduced, until in the end no more relevant
areas of application would remain.
7. Global export authorisations and internal compliance programmes
(Article 6 paragraph 4, Article 8 paragraph 2)
In granting global export authorisations or authorisations for the provi-
sion of intermediation services, the Member States are also to take into
consideration "the application by the exporter of proportionate, adequate
means and procedures" to ensure compliance with the Dual–use Regula-
tion. This refers to so-called "Internal Compliance Programmes" (ICPs).
Especially for larger enterprises, establishing internal compliance pro-
grammes can represent the suitable method of organizing its procedures
and assigning responsibilities. Many large companies have already im-
plemented appropriate administrative directives. By contrast, the prepara-
tion of such internal regulations may represent a disproportionate and un-
natural burden for small and medium-sized enterprises that suits neither
the character of such enterprises nor their structures. Therefore, the exis-
tence of an Internal Compliance Programme cannot constitute a manda-
tory prerequisite for granting authorisations. This can and must be taken
into consideration when interpreting the provision contained in Article 8
paragraph 2 which mentions "proportionate, adequate means". Moreover,
it is doubtful which role abstract internal programmes are to play in the
case of authorisations of intermediation services for individual transac-
tions. In our view, the existence of general internal rules is meaningless
in the case of individual authorisations.
In other respects, it is very important that if internal programmes exist
they are established exclusively and independently by the companies
themselves. Each company must examine itself specifically which organ-
isational structure best suits its situation. Only the companies themselves
can decide which procedures and processes are appropriate for them. For
that reason, generalised requirements and standard solutions must be
avoided. Since conditions differ in every company, neither the adminis-
trative authorities nor industry associations nor chambers of commerce
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are in a position to specify standards. Therefore, we firmly reject the
preparation of guidelines at the European level as suggested in the Commis-
sion Communication (Annex IV, Section b), last bullet point).
8. Target deadlines for decisions (Article 6 paragraph 2 sub-
paragraph 3)
The Member States are supposed to announce target deadlines by which
they are to decide on applications for export authorisations. BDI wel-
comes the introduction of periods within which certain decisions must be
communicated. This increases the companies’ planning security. More-
over, the Member States and the Commission should try to increase
transparency regarding the time required for processing applications, for
instance by publishing relevant information.
9. Exchange of information (inter alia, Article 4 paragraph 6, Article 7
paragraph 2, Article 9 paragraph 2 sub-paragraphs 2 and 3, Article 9
paragraphs 3 and 4, Article 15 paragraphs 2 and 4, Article 24)
The exchange of information among Member States and/or with the
Commission is mentioned in several parts of the draft Regulation. In part,
this also concerns the exchange of electronic data. For ensuring the nec-
essary confidentiality of sensitive data, the protection of the exchange of
such data is particularly important. For this purpose, a secure system
must be established.
Also, the exchange of information must occur in such a manner that the pro-
tection of the commercial interests of the concerned companies is ensured
and any potential for abuse for the purpose of preventing competition from
other Member States is securely ruled out. Finally, the intensified ex-
change of information must under no circumstances lead to an increase in
the time required for processing applications. Overall, we are sceptical of
the intensified exchange of information among Member States and the
Commission, and believe it should only be justified where it is required
in order to prevent undesired exports.
10. International cooperation (Article 23)
In the case of Community projects involving third countries in which
dual-use items or technologies play a role, an ad hoc committee is to de-
cide directly about export authorisations on the basis of a proposal made
by the Commission. This possibility for granting authorisations is to be
welcomed.
11. Amendments to the Annexes (Article 11, Article 19 )
The Commission proposes establishing a procedure involving a commit-
tee for the regular amendment of the list of items in accordance with in-
ternational export control regimes (currently, a formal amendment ordi-
nance is required in each instance). In this regard, no principal concerns
exist on the part of industry. However, it is crucial that the time between
the amendment’s publication and its entry into force remains sufficient
for allowing companies to implement the changes.
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12. General obligation to notify (Article 16 paragraph 1)
Article 16 paragraph 1 of the Recast Regulation provides that all export-
ers of listed items notify their intention to export the items to the authori-
ties. German industry is unable to recognise the reasoning behind such an
additional registration requirement. For exporting listed items, the com-
panies must either apply for an export authorisation or inform the authori-
ties about the use of the general export authorisation. Therefore, an addi-
tional general obligation to notify the intention to participate in foreign
trade does not provide new insights to the authorities, and only leads to
more bureaucracy for companies.
13. Filing of applications (Article 9 paragraph 1)
Article 9 paragraph 1 stipulates an extended duty of documentation when
filing applications for export authorisation. Companies are also supposed
to present "any relevant" information collected from a third parties "so as
to provide complete information to the national competent authorities"
about the concrete circumstances surrounding the export of the goods
(end-user, country of destination, end-uses). This wording appears ex-
tremely far-reaching and – when interpreted broadly – could lead to a
situation in which comprehensive research and documentation duties are
imposed on companies. This provision could also be used to continuously
request additional information from the exporter in the course of the pro-
cedure. From the perspective of industry, this is unacceptable. For the ap-
plicant, it must be clear from the start which information must be pro-
vided and which documents must be submitted. The companies are inter-
ested in achieving a rapid approval of their application and will therefore
endeavour to provide complete and comprehensive information and give
the authorities all available documents. Already today, this may include
information from their respective business partners. However, we em-
pathically reject extending such information duties to include further
sources. Is not the companies’ task to obtain additional, comprehensive
information from third parties. If required in the context of processing an
application, such information should be obtained by the authorities.
14. Tasks of and consultations with the Coordination Group (Arti-
cle 18)
Among other things, the Dual-use Coordination Group is supposed to ex-
amine "best practices and administrative procedures for the implementa-
tion and enforcement of the Regulation". There are no objections from
industry, provided the examination is limited to the internal administra-
tive organisation and procedural practice. However, under no circum-
stances must decisions be made regarding specifications, rules and stan-
dards that affect industry. Apart from the fact that regulations that exert
effects in relation to third parties may only be issued by the legitimate
legislative organs, we reject any type of external standards concerning in-
tra-company processes. This is an issue that the companies have to de-
termine themselves. Anyhow, it would not be possible to specify adequate,
uniform procedures for companies at a European level, since a centralised
approach would not in any way be compatible with the diversity of the
European economy and corporate culture.
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In future, consultations with the Dual-use Coordination Group are also
supposed to include "other relevant stakeholders" in addition to the ex-
porters. BDI rejects the inclusion of such a provision in the Dual-use
Regulation. Export controls are an issue that concerns politics, adminis-
trative authorities and the export industry. Therefore, these groups should
also be involved in an exchange of experience and consideration of new
developments and planned changes. Other interest groups such as politi-
cal non-governmental organisations not attributable to industry should
not be granted a permanent right to participate in the procedure since they
are not affected by the Regulation's scope of application. The Commis-
sion and the Member States are free to involve external groups in specific
instances. However, we do not believe that the inclusion in the Regula-
tion of a right to be heard is warranted.
About BDI
BDI (Federation of German Industries) is the umbrella organisation of
German manufacturing industry and industry-related service providers. It
represents 37 industrial sector federations with more than 100,000 private
enterprises employing around 8 million people. BDI relays the interests of
German industry to political representatives in Germany, Europe and
throughout the world. In its Working Group on Export Controls the BDI
gathers the expertise from member associations and companies dealing with
dual-use goods. We have elaborated this paper together with the German
Chamber Association (DIHK) and the German Association of Wholesale
and Foreign Trade (BGA).