On Wednesday 11 January 2023, the European Commission's Delegated Regulation (EU) 2023/66 of 21 October 2022, updating the list of dual-use items contained in Annex I to Regulation (EU) 2021/821 (the “EU Dual Use Regulation”), was published in the Official Journal of the EU. With its publication, the updated list comes into force as of 12 January 2023.
The “EU Dual Use Regulation”
The export of certain goods to non-EU countries is only permitted following the granting of an export license by the competent EU Member State authority. Such goods include items which, by virtue of their nature or properties, can be used for both civilian and military applications (“dual-use goods”). The EU regulator and Member State authorities apply particular scrutiny to ensure that dual-use goods are not moved to third countries under the guise of civilian use.
The EU Dual-Use Regulation governs the EU’s export control regime. It is regularly amended by the European Commission, to keep up with the various non-proliferation obligations, contracted by the member states and the progress of technology.
What is a delegated regulation?
The EU Dual-Use Regulation empowers the Commission to update the list of dual-use items set out in Annex I by means of delegated acts. Delegated acts are non-legislative acts adopted by the European Commission that serve to amend or supplement the non-essential elements of the legislation. Typically, delegated acts are used when legislative acts — including their Annexes — have to be (regularly) adapted to take account of technical and scientific progress. A delegated regulation allows the European Commission to act more swiftly since it does not need to pass the regular legislative procedure.
What is new?
Whereas the last two updates were very limited due to the Covid-19 pandemic, this year the EU Commission is introducing more far-reaching changes. In terms of their practical significance, however, these changes are likely to have little impact. Relevant amendments can be narrowed down to the following areas:
1. Bio-scientific and biochemical technology
The most substantial addition to the list of dual-use goods concerns software used in DNA Assemblers or Synthesizers that can design and create functional genetic elements using digital sequence data. With this listing, the EU legislator intends to prevent the use of DNA manipulating technology in bioweapons research.
2. Automotive and Transport
Several new listings adapt pre-existing export restrictions to the latest developments in (digital) radar technology. In this context, the Commission has launched an all-round effort to bring the control of radar technology for both automotive and nautical/airborne radars to the same level.
3. Other software and digital technology
These amendments are flanked by a general extension of software-related export control. The Commission standardizes the concept of software also for the field of aviation security and inserts new types of software as a controllable medium at various points in Annex I. This development also reflects the EU’s latest intensification of export controls on IT related manufacturing elements. Thus, the export of software in connection with certain field-effect transistors (so-called “MOFSETS”) is now subject to approval.
What should companies do now?
- Companies with business in relevant sectors should immediately check whether and to what extend their goods are affected by the new listings.
- Companies that provide services in the areas of digital- and biotechnology as well as Automotive and Transport should check whether the new provisions apply to them.
The newest amendments largely concern the digital world and reflect the growing tendency of the European Commission to include more software and numerical technology in the list of controlled items. Companies employing software in manufacturing processes, whose products or properties are already covered by European restrictions, should be particularly vigilant because more manufacturing software itself will likely become an even greater focus of export control regulations in the future.
Companies should generally be aware of the continuous enhancements to Annex I of the EU Dual-Use Regulation and adapt their internal compliance regimes accordingly, i.e. by imposing regular review intervals.
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