Explanatory Memorandum to COM(2006)829 - Community regime for the control of exports of dual-use items and technology [COM(2006) 828 final] [SEC(2006) 1696] - Main contents
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| dossier | COM(2006)829 - Community regime for the control of exports of dual-use items and technology [COM(2006) 828 final] [SEC(2006) 1696]. |
|---|---|
| source | COM(2006)829  |
| date | 19-12-2006 |
The proposal for the amendment and recast of Council Regulation N° (EC) 1334/2000 on the control of exports of dual-use items and technology has the objectives of strengthening and improving the EU dual-use export control regime. This will enable the EU to meet standards set by the UN Security Council Resolution 1540 and to implement most of the recommendations noted by the General Affairs Council following the 'peer reviews' of the implementation of the Regulation by the Member States in 2004 in conformity with the Thessaloniki Action Plan endorsed by the Heads of States and governments in June 2003. It also aims at introducing more clarity and at reducing regulatory burdens in the implementation of controls by EU exporters.
The EC Regulation on export controls of dual-use items and technologies contributes to the Member States' implementation of their commitments taken in international export control regimes or as State parties to the non-proliferation treaties and arrangements. The reason is that dual-use items are civil items that can be used for military purposes and, in some cases, for the production or as the means of delivery of weapons of mass destruction (nuclear, biological, chemical or missiles).
Since 11 September 2001, the mandates of international export control regimes, which were initially created by like-minded States to prevent the illicit acquisition by States of weapons of mass destruction or of their means of delivery, have been extended to the prevention of the acquisition by non-State actors of dual-use items in order to prevent attacks against civilians and states. Consequently, the European Council adopted in June 2003 the Thessaloniki Action Plan, which contained several provisions recommending the strengthening of the EU export control regime and an enhanced and more visible role for the EU in international export control regimes. It included considerations on an enhanced role for the Commission in those fora and also recommended an EU strategy to support the entry of new EU Member States in those regimes.
Following this Action Plan, several proposals were made to the Council in the autumn of 2003. They addressed the role of the Commission in the international regimes and a method to enhance EU coordination in those fora, proposing a strategy for the membership of new EU Member States. A 'peer review' of Member States' implementation of the Regulation was coordinated by the Commission and implemented by the Member States, with the support of a small task force comprising the Commission, the Council Secretariat and Finland. The Task Force recommended actions which were noted by the General Affairs and External Relations Council (GAERC) in December 2004. Those recommendations stressed, among other priorities, the need for a more pro-active approach of the EU against the acquisition by State and non State actors of dual-use items focussing on risks.
The existing Regulation (EC) N° 1334/2000 was adopted following two decisions of the European Court of Justice in 1995 which affirmed the exclusive competences of the European Community in the area of external trade in dual-use items. The current proposal aims at amending that Regulation.
The proposal to amend the Regulation will enable the EU to implement relevant aspects of the EU Strategy against the proliferation of Weapons of Mass Destruction and to contribute to other priorities of the EU such as the security of EU citizens, the prevention of biological, chemical or nuclear terrorist attacks, the support of EU defence-related industries in line with the Commission's communication on Defence made in 2003 and to EU and international security.
Consultation of interested parties
Consultation methods, main sectors targeted and general profile of respondents
The Commission launched a study via a consultancy firm to assess the views of exporters and other stakeholders in order to assess the impact of options to amend the Regulation.
In order to define a representative sample of stakeholders, a questionnaire was sent to about 450 potential dual-use exporters based in the EU including a large number of EU federations of industry. The consultation was also extended to any potential interested exporter as it was advertised on the DG TRADE website from 5 October 2005. The final sample of exporters who answered the questionnaire was representative of the distribution of suppliers and exporters of the 10 categories of dual-use items listed in Annex I of the Regulation. Based on the answers received, specific sub-samples of representative exporters were selected to be consulted on the various options to reform the EC Regulation. Because the options referred also to transit, transhipment and brokering controls, transporters and traders were also consulted.
The exporters were consulted on the final report of the impact assessment study and on the Commission services' assessment of the findings of the study. Opinions from member States and other stakeholders on the results of the study and the intended follow-up by the Commission services were collected from January until early July 2006 and are well reflected by this proposal.
Scientific/expertise domains concerned
The necessary expertise on dual-use was assured all along the processes of consulting and assessing the views of stakeholders. Expertise on dual-use items and on export control and security issues was a major criterion of selection in the call for tender.
The initial questionnaire aiming at identifying a representative sample of exporters has been prepared by DG TRADE and was included in the terms of reference of the call for tender. It was improved after consultation with a number of EU federations of industry. During the study, additional questionnaires on options tested were prepared by the consultancy firm and subject to Commission's endorsement before they were sent out to stakeholders (Member States' administrations and exporters).
EU federations of industry and individual exporters, Member States national competent authorities in particular national authorities competent to grant export authorisations and custom authorities.
The impact assessment study revealed a number of weaknesses in the options that DG TRADE had put for testing with the consensus of the different associated DGs. In some cases, DG TRADE knew that the options were weak but considered nevertheless that they had to be tested to confirm initial opinions shared with the Member States.
Some comments and suggestions made by industry could not be retained for a variety of reasons, and in particular as they would go beyond what is achievable in the context of the current revision of the Regulation. These include for example:
- The exemption of a multinational company from export controls of intangible transfers between its EU base and its foreign subsidiaries
- The change of the current system based on ex ante and case by case export control decisions granted to individual exporters for most of the Annex I items to third countries to a system of certified exporters through regular audits of their internal compliance programmes and intensive government to industry dialogue.
- The introduction of a pre-established maximum deadline for the process by national authorities of export authorisations applications.
- Introduction of an exemption for all small samples and small value shipments from export authorisations. However, the Commission will examine in 2007 the possibility to propose new Community export authorisations to facilitate certain exports to certain destinations based on industry's relevant input, and this could include the introduction of a de minimis rule in certain instances.
- The elimination or a radical simplification of the controls on non-listed items that Member States are enabled to conduct in addition to the items listed in the Regulation.
However, the Commission is sensitive to the concerns of industry, and it will continue its work in order to provide the least possible burdensome regulatory framework in order to enhance its international competitive position. For this reason, a review clause has been added to the proposal for amendment to the Regulation.
The results of the study were made available on 23 February 2006 at the following URL address: ec.europa.eu/comm/trade/issues/sectoral/industry
As to the decision to clarify the definition of intangible transfers of technology, it is not clear if the current Article 2biii) covers the transmission of controlled dual-use technology via the access to intranet by third parties located outside the EU. This can have an impact on industry as currently there is no EU-wide definition and no harmonisation of the enforcement of controls on intangible technology. However such impact could be reduced by the adoption of EU guidelines for the implementation of controls of intangible transfers which would include a practical understanding of the scope of technologies in the public domain.
Different options to control transit and transhipment have been considered. Given the high volume of trade passing through the EU, the option to submit all transit or transhipment of dual-use items to systematic pre-authorisation requirements was excluded as impracticable and excessively burdensome. The option kept is to allow all Member States' competent national authorities to take possession of a dual-use item in transit or transhipped when there are reasonable indications (mainly from intelligence sources) that the item is or may be intended for illicit proliferation in a third country. This option already exists in some Member States as it enables them to implement the Proliferation Security Initiative. The impact of this option on those few Member States who used to impose systematic prior authorisation on transit of dual-use items should be minimum as the volume of such authorisations that they reported is below 10 per year.
Different options to sanction illicit brokering of dual-use items have been studied based on the definition that brokering is a service facilitating a transaction covering dual use items . They have taken into account that brokering controls would cover goods located outside the EU and hence submitted to third country's legislation. The study has revealed the extreme difficulty to enforce such controls. It was concluded that controls should only cover the two following cases:
- when the broker is aware of the illicit WMD end uses of the goods in third countries
- when the Member State where the broker is located has informed him of such risks .
Those two cases will trigger the obligation for the broker /supplier of intermediation services to apply for an authorisation if he aims at doing the transaction.
The explicit reference to the possibility for Member States to introduce electronic management of export applications and authorisations in recasted Article 10.4 will facilitate the work of national administrations and exporters.
Different options have been tested to harmonise the conditions of use of the different types of export authorisations that are available in conformity with the Regulation so as to create a level playing field and improve EU security.
Regarding the Community General Export Authorisation (CGEA) , the impact assessment study has led the Commission to opt for clarifying the meaning of 'registration' and 'reporting' which are currently defined in Annex II of the Regulation, and for limiting the conditions under which the CGEA can be denied (Recasted Article 6.1.a)). This lead to greater convergence of practices across the EU.
Regarding the harmonisation of the conditions of use of the National General Export Authorisations (NGEA), the impact assessment study has revealed that some Member States had no system of registration and therefore, by lacking information on users, could not fully ensure the enforcement of the Regulation. The option to amend the Regulation aims at filling this gap. The study has also highlighted that the exporters who could benefit from National General Export authorisations at national level i do enjoy a comparative advantage compared to other exporters. The Commission's proposal to create new Community General Export Authorisations has been widely supported by industry and favoured by Member States. The Commission will try to make those proposals in 2007 based on information to be supplied by exporters and discussions with Member States.
Regarding the option to harmonise the Member States' practices of granting global export authorisations by obliging the exporter to carry out an internal compliance programme (ICP ), the study has revealed that when implemented, ICPs are considered as positive factors. In fact, those ICPs significantly enhance the capacity of the exporters to comply with export control provisions. The Commission proposal is to encourage Member States to grant global export authorisations to companies having ICPs in place.
Options to increase coordination and the sharing of sensitive information among Member States national authorities on the national implementation of the 'end use control' have been tested. The results have led the Commission to propose a middle position between the option tested during the impact assessment study (a systematic sharing of information between national customs authorities of all Member States' valid national requests) and the current situation, which is unsatisfactory from a trade and security point of view. The proposal aims at obliging Member States to share with other Member States and the Commission the general requirements that they impose on national exporters regarding the obligation of an export authorisation for non-listed items aimed at being exported to certain end users. In due course this should lead to greater convergence of national policies, and better information of and transparency for the exporting industry.
Amendments have been made to Article 7.2, Article 9 and Article 15 of the Regulation in order to:
- Align the EU legal framework on the informal but politically binding rules set in international export control regimes which regularly review the validity of denials;
- Ensure wider consultations between Member States in case of divergences of appreciation on some export application cases and to create a level playing-field within the EU;
- Enable the Commission to develop, in the future, an electronic secure system to share sensitive and possibly classified EU information.
The impact of those above mentioned proposals is expected to be positive both on trade and security issues.
The proposed recasted Article 11 establishes that amendments to the list of controlled items will be carried out using a comitology procedure, established in recasted Article 19 instead of requiring a formal Council Regulation. It will result in speedier update of the list of controlled items in accordance with the decisions adopted in the export control regimes.
The obligations regarding record keeping under Article 16 have been amended to take due account of demands from industry, supported by work carried out with Member States' experts, to improve the current situation by introducing proportionate and enforceable requirements depending on the transfers at stake.
The recast Article 21 provides for the imposition of criminal sanctions for at least serious infringements of the Regulation and implementing provisions will provide a deterrent for the violation of export controls regulations.
The impact of the creation of a recast Article 22 on international cooperation will:
- contribute to solving current situations such as those, among others, where exporters in third countries and in the EU are obliged to apply controls to transfers of dual-use items in the single market (concretely when third countries' laws impose re-export rules within the single market of dual-use items imported)
- allow for mutual recognition of export authorisations which has the potential to greatly facilitate joint industrial projects or research projects in particular with third countries members of international export control regimes or listed in the current CGEA.
- allow for the adoption of EU-wide specific export control rules that would be applicable to the technologies developed in the EU in the context of Community-financed international programmes involving third countries and would also cover access through intangible means to those technologies.
The impact of the replacement of the existing prior authorisation for transfers between Member States of items in current Annex IV (recast Article 25) by pre-notifications will facilitate transfers within the internal market without having a negative impact on security as Members States will retain the possibility of blocking such transfers for justified reasons.
Finally, a number of proposals are made in order to adopt in specific areas best practices and administrative measures whose impact has not been assessed but whose political justification can be found in developments in international export control regimes and in the recommendations adopted by the Council on the follow up to the 'peer reviews'.
3)
Contents
- Legal elements of the proposal
- Budgetary implications
- Grounds for and objectives of the proposal
- General context
- Existing provisions in the area of the proposal
- Consistency with the other policies and objectives of the Union
- 2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT
- Summary of responses and how they have been taken into account
- Collection and use of expertise
- Methodology used
- Main organisations/experts consulted
- Summary of advice received and used
- Means used to make the expert advice publicly available
- Impact assessment
- Summary of the proposed action
- Legal basis
- Subsidiarity principle
- Proportionality principle
- Choice of instruments
- 5) ADDITIONAL INFORMATION
- Repeal of existing legislation
- Recasting
- Annex
- Budget line concerned
- Estimated costs
- Total
This proposal is a recasting of Council Regulation (EC) N°1334/2000 in line with the Interinstitutional Agreement on the recasting technique for legal acts. It incorporates in a single text both the substantive amendments it makes to Council Regulation (EC) N°1334/2000 and the unchanged provisions thereof. The proposal will replace and repeal this Regulation . This will help make Community legislation more accessible and transparent.
Among the proposed amendments to the Regulation, there are in particular five items where the changes proposed go beyond a technical revision and update of Regulation (EC) N°1334/2000. These are the following:
- a proposal for the introduction of a 'comitology' procedure for the amendment of the annexes of the Regulation (lists controlled items and forms) and for the adoption of implementing measures;
- a replacement of the authorisation requirement for the transfer of items within the internal market which are listed in recasted Annex V with a 'pre-notification' procedure destined to facilitate trade within the EU internal market without compromising security interests;
- the introduction of a provision according to which Member States must apply criminal sanctions at least for violations of the Regulation; it responds to the call in the Thessaloniki Action Plan for a common EU approach regarding the criminalisation of illegal dual use exports, and to the call by UNSC Resolution 1540 for the introduction of appropriate civil or criminal penalties for violations of such export control regulations. The current sanction regimes of most Member States include both administrative and criminal penalties. The new provision will rule out through a minimum harmonization on EU level that, at least for serious infringements, offenders can profit from purely administrative sanctions in some Member States;
- a recital clarifies that the Regulation provides for a comprehensive legal framework for the export of dual use items, technology and related services. In this context, legal security is essential for those exports of dual use items, technology or services subject to this Regulation and performed in conformity with its provisions and with those adopted for its implementation in compliance with this Regulation. The legal security is particularly important in respect to third countries' legislation that might consider the same exports as criminal offences;
- the introduction of an article providing for the conduct of negotiations with third countries destined to deal with issues such as re-export requirements, in particular when they aim at preventing the full use of the single market by the EU importers of those dual-use technologies of non EU origin and to adopt specific project-based export control rules when EC financed projects involved third countries;
The other main proposals for the recast and amendment of Regulation (EC) N°1334/2000 are the following:
- the introduction of controls on transit ;
- the introduction of controls of brokering and the sanctioning of illicit brokering of dual-use items linked to a weapons of mass destruction programme;
- the clarification and update of controls of intangible transfers of technology including the provision of technical assistance;
- the introduction of some limited adjustments regarding the application of national controls on items non-listed in the Regulation to improve their efficiency and transparency
- the harmonisation of the conditions of use of general authorisations
- the inclusion of a criterion to enhance the granting of global licences to exporters implementing internal compliance programmes
- the introduction of possibilities for wider consultation among concerned Member States prior to granting authorisations essentially similar to denied transactions
- the improvement of the exchange of denials and other sensitive information and the possible introduction in the future of an encrypted electronic system for exchanging information on denials as well as other classified information
- the obligation of registration of exporters and of suppliers of the most sensitive items within the Community to competent national authorities
- provision for the establishment by national authorities of indicative deadlines for the processing of applications for export authorisations, and of deadlines for the treatment of requests for information from licensing authorities concerning the application of national controls.
Some measures, such as adaptation of the model form in Annex III to comply with the United Nations Layout Key for trade documents, which has provided Governments, organisations and the business community with a basis for a standard and aligned design of documents used in trade and transport in order to facilitate the use of the licence, have been left for further regulatory action under the comitology procedure.
Article 133 of the EC Treaty.
The proposal falls under the exclusive competence of the Community. The subsidiarity principle therefore does not apply.
The proposal complies with the proportionality principle for the following reasons:
Only the amendments to the Regulation which are necessary and whose justification has been confirmed have been proposed. Other issues will be dealt with and are addressed through administrative action or best practices or actions at national level.
As stated above, the financial and administrative burden is reduced to the minimum as the new obligations have been limited to what can be reasonably enforced and some of the new measures will facilitate the management of export controls.
Proposed instrument: Regulation.
Other means would not be adequate, first because an amendment to the existing legal instrument (Council Regulation) can only be done through another Regulation. Secondly, the decisions of the European Court of Justice have made it clear that export controls of dual-use items are an exclusive Community competence. Other measures that are of a non-legal nature and which have met the criteria that they can bring an added value to the EU have been proposed in the Communication.
4)
In the short term the proposals will not have significant financial consequences for the EU. The possible development and establishment of an EU secure system for sharing denials and other sensitive information would have a moderate financial cost, although a decision on whether or not such a system should be developed will be taken in agreement with Member States not before early 2007. An assessment of the costs of establishing such a system is provided in the annex..
Simplification
The proposal provides for simplification of legislation, and of the administrative procedures for public authorities (Community or national), and for private entities.
The use of the recasting technique allows the Community to combine in a single text both the substantive amendments proposed to the Council Regulation and the unchanged provisions thereof. Moreover, the original text of the Regulation has been improved and clarified in the interests of better regulation.
A number of proposals will simplify the work for the Community administrations (a comitology procedure for changes to the annexes and for the adoption of guidelines) and for private entities (adoption of best practices for the implementation of the Regulation, harmonisation of the conditions of use of export authorisations and their format, e-systems for the management of licence applications).
The adoption of the proposal will lead to the repeal of existing legislation .
The proposal involves recasting.
Costs of the possible establishment of a secure system for the exchange of information mentioned in the amended Article 15.4 of the proposal of Regulation
Introduction
The proposed new paragraph 4 of Article 15 of the recasted Regulation establishes the possibility of setting up a secure system for the exchange of information among Member States and as appropriate also the Commission. Such a system would be destined in particular to have access on-line to a database containing the denials of export authorisations (information currently shared via a CD-Rom), although other possible uses to facilitate the exchange of information provided for in the Regulation might also be considered.
The proposal at this stage only intends to provide a legal basis in case such a decision is taken; it does not prejudge any such future decision, which would have to be taken only after consideration of the parameters required for such a system and in agreement with the Member States.
20.02.01, within the operational part of the budget, and within the current amounts available.
In case in the future a decision to go ahead with such a system was taken, the budget could be split into five parts detailed in the table below:
Development 200. 50. 250.
Maintenance 10. 20. 20. 50.
Infrastructure 30. 10. 40.
Network 25. 15. 15. 55.
Support infra 30. 20. 20. 70.
Support user 40. 30. 30. 100.
Total 200. 185. 85. 95. 565.
The development would consist in refurbishing the current database using a server technology and including additional functions and possibilities. However, a significant part of the current database (e.g. the format) would be reused.
As regards the network costs, in principle they should be very limited as the current 'Testa secure' would be used. Such costs do not include the connexion costs incurred by Member States. Should a separate ad-hoc network be considered, it would require a specific budget, but this is not the option under consideration.
The user support budget would consist of setting up a helpdesk, which could be shared with other existing projects.
1334/2000