European Union: EU Publishes Non-Binding Guidance On Internal Compliance Programmes For Dual-Use Trade Controls

On August 5, 2019, the European Commission ("Commission") published its official Guidance on Internal Compliance Programmes ("Guidance").1 The Guidance aims to clarify and harmonize implementation of Regulation 428/2009 on Dual-Use Goods2 ("Dual-Use Regulation") by competent Member State authorities ("national export authorities") and EU-based exporters of dual-use goods ("exporters"). While the Guidance is non-binding, national export authorities will take it into careful account when considering applications to export, transit or broker dual-use items.

The Dual-Use Regulation

Dual-use items are goods, software and technology with both civil and military application. The Dual-Use Regulation specifies that this includes "all goods which can be used for both non-explosive uses and assisting in any way in the manufacture of nuclear weapons or other nuclear explosive devices."3

To promote its wider goals of international security and nuclear non-proliferation, the EU applies strict controls to the transit, export and brokering of dual-use goods. These are set out in the Dual-Use Regulation which states, among other things, that exporters must apply to national export authorities for authorization prior to undertaking any such activities.4

The Dual-Use Regulation is light on detail, affording national export authorities wide discretion to grant, modify and annul dual-use licenses. It does state, however, that exporters must be able to apply for three different types of authorization:

  1. a general license, which authorizes any exporter that respects its conditions to export dual-use items to a particular third country;5
  2. a global license, which authorizes a particular exporter to export a category of dual-use items to one or more specified end-users in one or more specified third countries; and
  3. an individual license, which authorizes a particular exporter to export one or more dual-use item to a specific end-user in a third country.

When assessing a request for authorization, the Dual-Use Regulation requires Member States to take general account of their international obligations (including, for example, under applicable sanctions regimes), and to "take into consideration the application by the exporter of proportionate and adequate means and procedures to ensure compliance with the provisions and objectives of this Regulation."6 One such procedure would be implementation by the exporter of an Internal Compliance Programme ("ICP"), a set of internal policies and processes designed to enhance compliance by the exporter with relevant EU and national export control rules.

New EU Guidance on ICPs

The new Guidance has the twin goals of helping exporters comply with EU and national export control laws, and supporting national export authorities to assess applications for individual, global and general export authorizations.

The Guidance is non-binding and promotes a tailored, company-specific approach to the development and implementation of ICPs. Importantly, however, it sets out the seven core elements that the Commission considers essential for an effective ICP.

No EU requirement to implement an ICP. There is no requirement under either the Dual-Use Regulation or the Guidance that an exporter must implement an ICP: the Dual-Use Regulation makes no explicit reference to an ICP and the Guidance merely states that exporters "usually" put an ICP in place to help identify, manage and mitigate risks associated with dual-use trade controls. However, certain national authorities have incorporated an ICP requirement into their domestic implementing laws, making it very important for exporters to assess the particular national context before determining whether an ICP is necessary.7

A tailored approach. If exporters do opt for an ICP, there are also no legal requirements at EU level as to either form or content. The Guidance states that the scope of an ICP is "usually determined by the size and the commercial activities of the specific company" and that "the most important aspect of developing an ICP is to keep it relevant to the company's organisation and activities." Key considerations might include, for example, the size, structure and scope of the company's business activities; the strategic nature of its items and possible end-uses/end-users; the geographic presence of its customers; and the complexity of internal export processes.

Seven core elements – a skeleton for company compliance. Although it advocates a bespoke approach, the Guidance does set out seven core elements it regards as "essential" for an "effective" ICP—the "basic and generic skeleton for company compliance." These core elements are: (1) top-level management commitment to compliance; (2) organization structure, responsibilities and resources; (3) training and awareness raising; (4) transaction screening process and procedures; (5) performance review, audits, reporting and corrective actions; (6) recordkeeping and documentation; and (7) physical and information security. The Guidance breaks down each of these seven categories into two sub-sections: "what is expected?" which sets out objectives for each element; and "what are the steps involved?" which fleshes out possible actions or solutions for attaining the objectives. In its Annex I, the Guidance also provides a list of "helpful questions" that exporters and authorities can use to develop or review ICPs.


[1] Commission Recommendation (EU) 2019/1318 of 30 July 2019 on internal compliance programmes for dual-use trade controls under Council Regulation (EC) No 428/2009, OJ L205/15. Annex I of the Dual-Use Regulation sets out a list of dual-use items that are automatically subject to licensing requirements by national export authorities. Depending on national implementation regimes, items not listed in Annex I may also be subject to prior authorization if the country of destination is subject to an arms embargo or the exporter suspects, or has been informed, that the goods in question may be intended for a military end-use.

[2] Council Regulation (EC) No 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items (recast) ("Dual-Use Regulation").

[3] Dual-Use Regulation, Article 2(1).

[4] Dual-Use Regulation, Articles 3-5.

[5] There are currently six general export licenses in place covering, respectively: exports to Australia, Canada, Japan, New Zealand, Norway, Switzerland, Liechtenstein, and the U.S; export of certain dual-use items to certain destinations; export after repair/replacement; temporary export for exhibition or fair; telecommunications; and chemicals.

[6] While the second requirement only applies to applications for global licenses, the Guidance states that one of the goals of its ICP Guidance is to help Member States decide on applications for all three categories of licenses.

[7] For example, exporters based in Luxembourg must implement an ICP if they are applying for a global license (Luxembourg law, loi du 27 juin 2018 relative au control des exportations, Article 5).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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