Latest Developments In The Area Of Export Control
28 June 2012
Category: Legal Updates
1. Intra-Community Transfer of Defence Related Products
On 30 June 2009, Directive 2009/43/EC (the “Directive”) entered into force. The Directive is aimed at simplifying the rules and procedures applicable to the transfer (i.e. transmission or movement) of defence related products within the EU (i.e. from one Member State to another). Existing national systems often do not distinguish between exports to third countries and transfers between Member States. The Directive applies to all products, components and technologies listed in the EU Common Military List. The Directive was transposed into Irish law by the European Communities (Intra-Community Transfers of Defence-Related Products) Regulations 2011 (the “Regulations”) (http://www.irishstatutebook.ie/2011/en/si/0346.html). The Regulations come into force on 30 June 2012.
The Regulations make it clear that a transfer of military goods or technology from Ireland to another Member State still requires prior authorisation and the Department of Jobs, Enterprise and Innovation (DJEI) may still use individual licences (in exceptional circumstances) where, for example, it is necessary for the protection of the essential security interests of the State or on grounds of public policy. However, the Regulations, in giving effect to the Directive, provide for two new types of licences for military goods for the first time i.e. general and global transfer licences. The use of such licences could significantly facilitate and speed up a company’s daily business administration, as not every single shipment will require prior approval from DJEI. These new licences are considered below.
General Transfer Licences
One of the primary aims of the Regulations is to replace existing individual licences with general licences for those intra-Community transfers where the risk of re-exportation to third countries is already controlled, e.g. purchases by the armed forces of other EU Member States and transfers to ‘certified’ companies of components in the context of industrial cooperation.
Under the Regulations, DJEI is required to publish one, or more than one, general transfer licence, which shall authorise a supplier in the State who complies with its terms and conditions to transfer a product or category of product specified in the licence to a category of recipient located in another Member State. A general licence must be published for at least the following transfer types, where:
a) the recipient is part of the armed forces of a Member State or a contracting authority in the field of defence, purchasing for the exclusive
use by the armed forces of a Member State;
b) the recipient is an undertaking ‘certified’ in accordance with Regulation 15 (see below);
c) the transfer is made for the purposes of demonstration, evaluation or exhibition; and
d) the transfer is made for the purposes of maintenance and repair, if the recipient is the originating supplier of the defence-related products.
A supplier intending to rely on a general licence for the first time must inform DJEI in writing of its intention to do so. This notice to the DJEI must be given not later than 30 days prior to the date of first transfer. The form this notice must take will be specified on the DJEI website.
Certification under Regulation 15
In terms of a company’s daily business activities, the most attractive general licence is probably that for certified undertakings (due to less bureaucracy, easier inter and intra-company transfers, speeding up of a company’s daily business administration, optimisation of supply chains, etc.). Certification is granted at national level and is meant to testify to the special ability of defence undertakings to receive defence-related products and, where appropriate, to respect all the conditions attached to those products such as end-use conditions. A certificate is valid for a maximum of 5 years and will be recognised throughout the EU.
However, to avail of this type of licence, a recipient must undergo the detailed, and rather onerous, certification process set out in Regulation 15. As certificates have to be mutually recognised, a Commission Recommendation (2011/24/EU) also provides Member States with common certification guidelines. Annex I of the Recommendation contains a particularly useful set of ‘questions and guidelines on the description of internal compliance programmes and subsequent assessment’ that lists key areas as:
- organisational, human and technical resources allocated to the management of transfers and exports;
- chain of responsibility;
- internal audits;
- general awareness raising;
- physical and technical security;
- record-keeping and traceability of exports and transfers.
Annex II of the Recommendation contains a standard certificate template which competent authorities are encouraged to use.
DJEI is required to monitor compliance of the recipients of a certificate with its terms at least every three years. It should also be noted that both DJEI and the European Commission are required to publish a central register of certified recipients.
Global Transfer Licences
Global transfer licences, currently only available for exports of dual use items, will now be issued to individual suppliers on request and will authorise the supplier to transfer defence related products, or categories of products, to certain recipients, or categories of recipients, in one, or more than one, Member State. A global transfer licence will be valid for 3 years and may also be renewed. Up to now, military export licences were valid for a maximum of one year only.
DJEI is free to determine the products eligible for the different types of transfer licences, and the terms and conditions of such licences, including limitations on the export of products to a third country. These details have yet to be published.
A supplier must inform a recipient of the terms and conditions attached to a licence including limitations relating to the end-use or export of the defence-related product concerned. A recipient of a product received under a transfer licence from another Member State seeking an Irish export licence for that product will also be required to declare to DJEI that it has complied with any export limitations attached to the initial licence and has obtained any required consents from the originating Member State.
It is important to note that the Regulations also set out strict record keeping requirements relating to transfers made under individual, global and general transfer licences and records must be kept for at least three years from the end of the relevant calendar year. As with other Irish export control legislation, serious penalties exist for breach of these Regulations.
Finally, it is important to note that Ireland chose not to provide for the broad licence exemptions permitted under Article 4(2) of the Directive.
2. New Annex I to EU Dual Use Regulation
On 15 June 2012, Council Regulation 388/2012 (the “2012 Regulation”) entered into force and has direct and immediate effect in Ireland. The Annex to the 2012 Regulation replaces Annex I of Council Regulation 428/2009 (the “Dual Use Regulation”). Annex I of the Dual Use Regulation provides a listing of dual-use goods, software and technology that are controlled for export, transfer and brokering purposes and that require a licence before export or transfer outside the EU or for the provision of brokering services. The amendments to Annex I are a result of the review of various international arms control agreements.
The amendments to Annex I are wide-ranging and include de-controls on certain specified items and amendments to goods descriptions and definitions. Depending on the exact nature of your company’s business activities, you could need to either apply for, or de-register from, export licences as appropriate. Companies are therefore advised to study these amendments carefully.
We would also highlight that the above has knock-on effects for the many other national and EU legislative instruments which make reference to Annex I, e.g. country-specific trade sanctions.
The 2012 Regulation and the new Annex I can be found here.
A helpful change note summary of all changes made can also be found here.
For more information, please contact:
Senior Associate, Commercial,
t: +353 1 6145226
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York. © Copyright Mason Hayes & Curran 2012. All rights reserved.