Feeling the Winter's Cold? For Export Controls, It's Hot in Brussels!

Posted by Arne Mielken

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EU Export Control ConferenceOn 19 December 2017, Amber Road joined hundreds of trade professionals at the 2017 Export Control Forum in Brussels hosted by the Estonian Presidency of the Council of the European Union and the European Commission. The Forum was a great opportunity to participate in discussions about the ongoing export control programs in the EU and learn about the current legislative developments regarding the proposal for a modernisation of EU export controls.

High-ranking speakers from EU institutions and international organizations discussed several important topics around export controls including the new proliferation threat landscape in 2017. Amber Road proactively participated and the key points of the conference are summarized here.

Emerging Innovation:  Additive Manufacturing or 3-D Printing

The proliferation of recent advances in additive manufacturing (more commonly referred to as 3D printing technology) is posing new threats to export controls. For example, concerns were expressed around the ability to create weapons designed by specialists that can be printed by anyone with a suitable printer simply by downloading the relevant blueprints.

Additive manufacturing is actively being explored by some of the biggest companies in the aerospace and defense sector. They have developed prototypes and components where the opportunities of 3D printing can be used to manufacture products that fall into dual-use categories. However, it does not stop there! The possibility of manufacturing critical nuclear technology using 3D printers in order to circumvent export controls was mentioned. As such, in the future it might even be possible to produce steel for use in a centrifuge to enrich uranium with an off-the-shelf 3D printer paired with advanced quality control technology and the proper knowledge. The working groups proposed that certain blueprints for 3D-printed components should be controlled to reduce the potential for the production of a physical item based on the digital information.

Emerging Technology:  Blockchain

Originally devised for the digital currency Bitcoin, block chain technology has been said by some to “revolutionize global trade and commerce” in the future. By allowing any digital information to be distributed but not copied, some observers feel that any information (including sensitive export control related information) can be held by millions of computers simultaneously, leaving the data at risk to being accessed by anyone through the worldwide web.  While blockchain appears to still be in its infancy, the impact of the global export control system should be considered early on. The meetings raised questions about how the EU should regulate blockchain systems for export. For now, there seems to be little consensus as to whether blockchain-based systems will help or hinder monitoring for illicit transactions and fraud, in particular in regards to anti-money laundering, know-your-customer, and due diligence programs — all critical to effective WMD supply-side controls.

Emerging Financial Concern:  Implementation of the JCPOA with Iran

The practical implementations of the Joint Comprehensive Plan of Action (JCPOA) was also discussed. The JCPOA was presented as a historic landmark for maintaining non-proliferation in Iran. Participants mentioned that despite the easing of the sanctions, the difficulties of arranging payments to Iran are still a major showstopper, with most EU banks unwilling to facilitate payments for any European business wishing to receive or make payment to a recipient in Iran. This still limits trade opportunities and is an issue the EU Commission should address carefully.

Emerging Export Rules:  EU Implementation of Current Export Control Rules in 2016-2017

The EU implementation of current export control rules in 2016-2017 was also discussed as detailed in the Annual Report on the implementation of Regulation (EC) No. 428/2009 - Dual-Use Items - COM (2017) 679 of 21 November 2017. Looking into the future, the amended 2018 Dual-Use regulation was mentioned and its key changes were highlighted. The amended Annex I will include changes that were agreed in the Wassenaar Arrangement and others suggested by the Australia Group, the Missile Technology Control Regime and the Nuclear Suppliers Group. The EU Commission had published a detailed set of changes on 06 December 2017 on the update of the EU Dual-Use control list. On 16 December 2017 this delegated regulation entered into force.

Emerging Guidelines:  EU Internal Compliance Programme (ICP) Guidelines

The EU Commission provided an update on the development of ICP guidelines. These do not exist at the European level, but the EU Commission has elaborated some first draft elements of the proposed EU ICP guidance. The current draft has two parts; it first explains what the EU ICP is and sets expectations and direction. Next, it provides for an export control checklist, as well as explains how companies can identify and handle doubtful questions or suspicious activities when discovered. This will be generic guidance (not sector specific), which is non-binding. There will be specific guidance for SMEs and no contradiction with other systems like ISO or AEO will be assured. Another industry involvement event will be set for February or March 2018.

Emerging Control in Cyber Space:  Where Do We Stand?

The state of play over control of cyber-surveillance technology and export controls in a 24/7 global cybersecurity industry were discussed extensively. Examples include mobile telecommunications interception equipment, Intrusion software, Internet protocol (IP) network surveillance systems, data retention systems, lawful interception (LI) systems, monitoring centers and digital forensics systems.

According to the presenter from German Federal Ministry of Economic Affairs and Energy, the control of cyber-surveillance exports should also be guided by the general export control in goods principles. As such, they should be product-specific and narrow in definition, but not based on end-use. Ultimately, the burden of proof should be pushed to the exporter, who often will not be able to provide proof of how cyber-surveillance exports are to be used.

The Commission’s proposals on a dual-use regulation contains a series of amendments that would give human rights, international humanitarian law and terrorism a more central role in member states’ dual-use export controls and create an expanded set of controls on exports of so-called cyber-surveillance technology. In this context, Amnesty International took the floor and provided several noteworthy examples of the how surveillance and hacking, malware etc. affects human rights very negatively.

Emerging Restrictions:  e-Licensing

The conference participants also looked into the future of licensing, or "e-control":  the development of an EU export control network and the long march towards e-licensing. Some Member States are already making use of this. The state of implementation across the EU is sketchy at best. So, can a pan-EU electronic licensing system be the solution? Can the EU Commission develop a pan-European system for the entire EU? Such e-Licensing architecture will include a front and back office, and be integrated with systems similar to the EU Single Window. After a planning phase and further trials, the project could be ready by 2020. A study was launched to consider the view of the EU Member States on this idea.  A prototype has been developed to show how the front office would look. As such, “Electronic ID” facilitates would be offered and the list of applications made and authorizations held can be shown.  An industry consultation is expected in 2018.

Emerging Recast Regulation:  Businesses, Regulators, Industry and Civil Society Weigh In On the New EU Dual-Use Recast Regulation

The afternoon session was dedicated to an extensive discussion on the EU Commission’s proposal for the modernization of EU Export Control Policy. In September 2016, the European Commission published a proposed ‘recast’ of the EU Dual-Use Regulation; the main regulatory instrument for EU member states’ controls on the trade of dual-use items. The conference featured the views of all categories of stakeholders. First, both EU decision makers (the European Parliament & EU Council) presented their perspectives on the recast. For the EU Parliament, the focus was the need to find a balanced regulation for the new cyberworld (see above) since the EU Council wants to ensure the regulation recast will be able to handle the next generation of export control requirements.  Industry and businesses looked at the modernization of export control from various perspectives: the impact on the global industry, the security industry and the IT industry. Finally, the civil society perspectives reminded us to promote rules for global surveillance.

The European Parliament and Council of the European Union are currently examining the EU Dual-Use Recast. The review is expected to conclude with the adoption of a new version of the Regulation in late 2018 or early 2019.

Amber Road at the EU 2017 Export Control Forum

Amber Road’s global trade experts regularly participate in conferences and seminars around the world to gain firsthand knowledge about the real-world problems facing importers and exporters. As a truly global end-to-end global trade management software provider, it is important to understand how some of the world’s largest global companies can transform their supply chains to adapt to new regulations. The EU 2017 Export Control Forum was, therefore, a great opportunity to engage with policy makers and stakeholders to work on these objectives and understand how EU policy in the field of export control might develop in the future.

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This post was published on December 20, 2017 and updated on December 20, 2017.

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Topics: Export Management, Export Compliance, End-Use Management, Deemed Exports

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