Legally compliant handling of dual-use goods in international trade
In international customs law, dual-use goods play a special role because they can be used for both civilian and military purposes. For companies, this is of central importance because compliance with legal requirements is essential for export processing. Various regulations, such as the European Dual-Use Regulation and national regulations, form the basis for export control in this area. The legal basis for the export control of dual-use goods in international trade is derived from a multitude of EU and national regulations as well as the Foreign Trade and Payments Act. Therefore, an export license is required for many cases involving dual-use goods. Violations of the licensing requirement can be severely sanctioned.
Even if only civilian use is considered, the mere possibility of using products, technologies, or software for military purposes makes dual-use goods an extremely sensitive area in export law. The goal of export control is to prevent the proliferation of weapons of mass destruction and strategically important goods and to achieve international security objectives. Companies should therefore be thoroughly familiar with the foundations of legal regulations for dual-use goods to fulfill their obligations. Accordingly, companies should act prudently, according to the law firm MTR Legal Rechtsanwälte, which also advises on customs law.
Civil and military usability
Dual-use goods can include, for example, machine parts and machines intended for civil aviation but can also be used in weapons systems. Machines with dual-use are also subject to export control, especially if they can be used for military purposes. Similarly, certain chemicals used in medicine or agriculture can also be used for the production of chemical weapons. Materials such as special metals or composite materials are further examples of dual-use goods as they can be used both civilian and militarily. In software, dual-use potential can exist, for example, through data protection and IT security in the civilian domain, and it may be relevant for secured military communication. Valves as technical components with dual-use also fall under export control. A CD player might be considered a device with dual-use potential due to its laser technology, as powerful lasers could also be used militarily. The power of machines or components plays a crucial role in determining export control obligations. Technology is central to dual-use goods because it can be used for both civilian and military applications and is therefore subject to export control. Machine tools are another example of dual-use goods, which may require an export license. The term ‘goods’ is used in the classification of dual-use goods to determine the nature and intended use. The type of goods is crucial for licensing requirements as different legal regulations apply to various categories. Dual-use goods are products suitable for both civilian and military applications. The regulation of dual-use goods occurs in the EU context through specific annexes of the Dual-Use Regulation, which set technical parameters and control obligations. Dual-use goods can be used in various fields such as industry, research, medicine, or communication.
In the European Union, the handling of dual-use goods is regulated by Regulation (EU) 2021/821. It provides a uniform basis for export control of such goods within member states. In Germany, European regulations are supplemented by the Foreign Trade and Payments Act (AWG) and the Foreign Trade Ordinance (AWV). These stipulate, among other things, that an export license is required for certain dual-use goods, even if the intended use is purely civilian.
Clarification of licensing requirements
The customs significance of these regulations is substantial. Companies wishing to export dual-use goods must clarify in advance whether a licensing requirement exists. The decisive factor here is the so-called EU Dual-Use Goods List, which is regularly updated. The appendices of the EU Dual-Use Regulation, particularly Appendix I and Appendix 1, serve as central goods lists for the categorization and legal classification of the affected goods. These lists and their detailed listing define the technical parameters and intended uses of the listed goods. Codings in customs systems are crucial at the time of export declaration to ensure accurate classification and identification of dual-use goods. The licensing requirements arise from the Dual-Use Regulation, the EC Dual Use Regulation, and other regulations, which include various types of export licenses – national, EU-wide, and general. The Federal Office for Economic Affairs and Export Control (BAFA) is the responsible authority for granting corresponding licenses in the Federal Republic of Germany. The export of dual-use goods is subject to strict control procedures to ensure compliance with legal requirements. In addition to export, the transfer, transit, and mediation of dual-use goods are regulated within the framework of export control. The legal bases are the VO, the Dual Use VO, and the EC Dual Use Regulation, which are regularly updated through revisions, amendments, and ongoing adaptations. The Commission, particularly the European Commission, is responsible for revising and updating the regulation and its appendices. The Foreign Trade and Payments Act and the different levels of European and national legislation comprehensively regulate export control. The export of dual-use goods is subject to a clear licensing procedure in the Federal Republic of Germany. Article 3 of the EU regulation is a central legal provision for export control. If the export control regulations for dual-use goods are violated, severe penalties are imminent. Export control encompasses numerous issues that are of great importance to companies, including compliance with lists, licensing requirements, and monitoring of exports. The term dual-use goods refers to items that can be used for both civil and military purposes and therefore require special legal classification and control.
Before an export takes place, exporting companies must conduct comprehensive examinations. First, it must be determined whether the affected goods are on the goods list. Furthermore, it must be checked whether there are specific restrictions for the destination country, e.g., within the framework of an embargo, and whether there are concrete indications that the goods could be used for military or security-critical purposes. If such a suspicion exists or there is uncertainty, a license must be applied for. If this is missing, even an unintended violation can have serious legal consequences.
Non-listed dual-use goods: Risks and obligations
Non-listed dual-use goods pose a particular challenge for export companies. Even if these goods are not explicitly listed in the appendices of the EU Dual-Use Regulation, they may nonetheless be used for military or other sensitive purposes. Especially in the field of export control, special caution is required, as the export of non-listed dual-use goods may also require a license.
The EU Dual-Use Regulation includes the so-called catch-all clause, which stipulates that the export of goods not listed as dual-use goods may still require an export license if they are intended for certain critical uses. This particularly involves cases where there are indications that the goods could be used for military end purposes, for the production of weapons of mass destruction, or for other security-relevant purposes. The regulation obligates export companies to carefully examine the intended uses of their goods and to involve the competent authorities in case of doubt.
For companies, this means that they must not only keep an eye on listed dual-use goods but also conduct a comprehensive risk analysis for non-listed goods. The Federal Office for Economic Affairs and Export Control (BAFA) in Germany is the central contact point for questions regarding export licensing and offers support in complying with the complex regulations. It is advisable to check in advance of an export of non-listed dual-use goods whether a licensing requirement exists and, if necessary, apply for an export license in good time.
Compliance with the requirements of the EU, the Dual-Use Regulation, and national regulations is essential for export companies to avoid violations and associated sanctions. Those who are aware of and observe the risks and obligations associated with non-listed dual-use goods not only protect their own company from legal and economic disadvantages but also contribute to international security.
Severe penalties for violations
A distinction must be made between administrative offenses and criminal offenses. For example, anyone who negligently exports a license-requiring product without the necessary license commits an administrative offense pursuant to § 19 AWG. This can be punished with a fine of up to 500,000 euros. If there is intentional misconduct, for example, through the deliberate circumvention of an export prohibition or delivery to an embargoed country, it is regularly a criminal offense. This may be punished with a prison sentence of up to five years, or up to fifteen years in particularly serious cases. Violations of export control regulations for dual-use goods therefore carry severe penalties that serve as deterrence and ensure compliance with legal regulations.
In addition to criminal consequences, economic damages are also threatened. Companies risk not only high fines and penalties, but also the loss of export rights, listings on international sanctions lists, civil lawsuits by business partners, as well as massive reputational damage. Especially in internationally operating sectors, such an incident can endanger the entire business model.
Effective control
It is all the more important to have effective export control within the company. This includes establishing an efficient compliance program that ensures all exports are legally reviewed and license-requiring processes are recognized. Employees should be regularly trained, and a fixed process for export checks should be established. Clear documentation of all export activities helps to prove compliance with legal obligations in case of doubt.
Those who deal with dual-use goods bear great responsibility from a legal and ethical perspective. Compliance with export control regulations is not only a legal obligation but also serves international security and stability. Therefore, violations of these rules can have significant legal and economic consequences.
MTR Legal Rechtsanwälte advises on customs law and supports companies in legally secure international trade with dual-use goods.
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