Dual-use goods are defined as goods, equipment, technology, and knowledge that may have either civilian or military use or may contribute to the proliferation of weapons of mass destruction.
As part of their global strategy, most countries have regulations in place to control the export of dual-use goods. National authorities issue the lists of products for which they want to control the exports and for which a license is required.
Every exporter should understand that they are responsible for checking if the goods they want to export are on these lists and if so, to apply for the proper export license.
And yes, this may prove complex and difficult depending on the products. Some components may not be controlled under the dual-use regulations of the EU based on their technical characteristics.
However, they may be upgraded in the future after exportation and used in improper activities.
To prevent that from happening, the EU has implemented a “catch-all” clause. This clause allows national authorities to control any product not listed, but in which exportation is suspected to go against non-proliferation policy due to different factors as the identity of the importer, country of destination, or new potential use of the goods.
EU Article 4 of Regulation 1334/2000 defines the “catch-all” clause.
Paragraph 1 states that an authorization shall be required if, while not listed, “the items in question are or may be intended, in their entirety or in part, for use” at any stage of development of chemical, biological, or nuclear weapons.
Paragraph 2 extends this clause to all non-listed items that “are or may be intended, in their entirety or in part, for a military end-use”, exported to countries subject to an arms embargo, or intended for use as a component of listed military items exported without authorization.
Finally, paragraph 4 is very important as it sets the responsibility of the exporter to report to the authorities any awareness that the item he wants to export, even if non-listed, is intended for use as per paragraphs 1, 2, or 3.
This regulation thus states that exporters are legally required to assist countries in dual-use export control and can be prosecuted for not doing so: whether by not applying for the appropriate export license of a non-listed item, or for not reporting awareness of end-use of an item contrary to the paragraphs 1, 2, 3 above.
This is an EU-wide regulation, with penalties dictated by a member state.
In France for example, the maximum penalty for noncompliance is three times the value of the goods and up to five years in prison. Additional penalties may be levied by the US if the goods fall within the US re-export rules.
The “catch-all” clause requires the exporter to report any transaction that they “know or have reasons to know” can be contrary to the dual-use goods regulations.
Yet, the problem is to define what is “having knowledge”.
There are no texts in the regulation defining the measures a company should adopt to comply with this obligation.
Exporters must demonstrate their “due diligence” through engaging in denied party screening, end-user verifications, implementing procedures with their service providers, and building compliance manuals.
Tradewin can help with that.
For any assistance to achieving this or guidance in Export Controls in Europe, you can contact Tradewin's export control consultants.