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Document 52014DC0244
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT The Review of export control policy: ensuring security and competitiveness in a changing world
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT The Review of export control policy: ensuring security and competitiveness in a changing world
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT The Review of export control policy: ensuring security and competitiveness in a changing world
/* COM/2014/0244 final */
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT The Review of export control policy: ensuring security and competitiveness in a changing world /* COM/2014/0244 final */
COMMUNICATION
FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT The Review of export control policy:
ensuring security and competitiveness in a changing world
1.
Introduction
The EU is a major producer and
exporter of dual-use items and therefore a significant actor in counter-proliferation
export controls.
The EU export control regime emerged in the late 1990s and was gradually strengthened
over the last decade,
in particular in response to the EU Strategy against the proliferation of
weapons of mass destruction (WMD) of December 2003. Regulation (EC) No 428/2009[1]
(hereunder 'the Regulation') implements international commitments under United
Nations Security Council Resolution (UNSCR) 1540 (2004), as well as relevant international
agreements and multilateral export control regimes. The Regulation enables
the free circulation of dual-use items – with some exceptions – inside the EU
and lays down basic principles and common
rules for the control of the export, brokering, transit and transfer of dual-use
items. Article 25 of the Regulation
calls on the Commission to review its implementation and present proposals for
amendments. Moreover, ten years after the adoption of the EU Strategy against
WMD proliferation, the Council recently called for the continued pursuit of an
effective EU WMD counter-proliferation policy and for a review and
strengthening of export controls[2]. As a first step
toward preparing the review, the Commission issued a Green Paper[3] launching a broad
public debate concerning the EU export control system and, in
January 2013, published a Staff Working Document[4] identifying the main
issues raised by over 100 stakeholders, including their views concerning
possible evolutions towards a more integrated EU export control regime ensuring
security and a more level-playing field. A report to the European Parliament
and Council on the implementation of the Regulation was adopted on 16 October
2013[5], marking a second
step in the review process. The present Communication aims at mapping the direction
for EU export controls, and identifies concrete policy options for their modernisation
and their adaptation to rapidly changing technological, economic and political
circumstances. This Communication has also been
identified as an intiative under the Regulatory Fitness and Performance
Programme (REFIT).
2.
Export
controls in a changing security, technological and economic environment: the
need for an export control policy review
The global counter-proliferation
system has developed considerably since the turn of the century, and robust
barriers have been erected against proliferation. Export controls constitute a
key instrument in the counter-proliferation
toolbox but they must keep pace with evolving proliferation threats,
rapid technological and scientific developments and transformations in global
economic activity that create new security challenges and impacts
on the global level-playing field.
2.1. Evolving and new security
risks and threats
There are growing
WMD proliferation challenges and WMD proliferation still constitutes one
of the greatest security risks for the EU, especially as an increasing
number of states
are developing capabilities of proliferation concern.
Trade in sensitive items is therefore likely to remain a crucial pathway
to outfit covert proliferation programmes in future.
Globalisation
and the increasing activity of non-state
actors involved in clandestine proliferation
programmes lead to a confluence of transnational
security threats whereby illicit activities converge and a drug trafficker may also act as a terrorist or a
proliferator. The terrorist threat
and
vulnerability
to unconventional attacks continue to require special
attention,
notably due to the changing profile of terrorists and the
globalised nature of terrorism.
Proliferators
are dynamic and devise evolving proliferation strategies to
exploit the vulnerability of the interconnected
global trading and information systems. They elaborate techniques to evade
controls
using
increasingly sophisticated support networks characterised
by
the presence of a variety of non-state actors (including unsuspicious
legitimate operators such as suppliers unfamiliar with proliferation
risks, financing agencies, transport operators, scientific and academic
bodies) and
moving
sensitive items through areas with weak domestic institutions and trans-shipment
hubs.
2.2. Rapid technological and
scientific developments
Innovation
and the spread of technological advances play a key role in the emergence
of new proliferation risks: the security of governments, but also of
companies and citizens, has a growing technological component. New
technologies put weapons design and manufacture within the reach of a
larger group of persons, thereby multiplying threats. Furthermore, the
rapid diffusion of information technology is exposing modern economies to
new risks induced by the connectivity associated with global trade and
global data networks - including the emergence of
specific "cybertools" for mass surveillance, monitoring,
tracking and interception. Cyber-security
is now crucial for the security of the EU and "cyber-proliferation"
has become an important dimension of export controls.
Exports are
increasingly transmitted, not transported. In
the age of cloud computing, information flows containing sensitive
technology can be used to produce unlimited quantities of
sensitive goods and present
a major challenge for export control, especially due to
the inapplicability of border controls, and the difficulty for companies
to ensure compliance (e.g. with respect to IT architecture, engineering
collaboration, travel of experts etc). Export
controls thus need to operate 'online' in the context of a globally
connected world, in which intangible technology transfers (ITT)[6]
have become increasingly significant vis à-vis the physical
movement of goods.
Scientific research
leads to extraordinary advances that benefit society, but the risk that research
could be misused creates a growing tension between the
principle of openness in science and security concerns.
Debates have highlighted the need to take into consideration the global
nature of science and the free flow of scientific
information[7],
but have also emphasised the need to address the risk
associated with potential abuse of scientific research and to ensure
independent assessment of the security implications.
2.3. Global supply chains
and the level-playing field
Security
has become a key element for responsible supply chains. Export
controls need to protect legitimate trade from the risks associated
with illicit transactions at a time when trade flows are
becoming more complex and vulnerable, as a more
rapid and dematerialized global trade emerges from the multiplication of
cross-border flows of goods, investment, services,
know-how
and people associated with international production networks. The
use of intermediaries, front companies, diversion and transhipment points
have multiplied the number and types of actors and activities involved in
proliferation-sensitive transfers. The
development of on-line services and e-commerce adds
new challenges as digital trade must remain open and secure.
The
rise of global value chains and expanding international manufacturing
capacities lead to an increasing foreign availability
of dual-use items. The ownership and operation of dual-use industries is
increasingly internationalised and there is now a remarkable variety of
actors involved. This fundamentally affects
the notion of "supplier" which lies at the core of the export
control and illustrates the need for flexible export controls adjusting to
changing economic realities.
The
profile of high-technology industries is also changing. The blurring
of civilian and defense technology and
industrial bases and the multiplication of items with uncertain dual-use
features make it increasingly difficult to distinguish
between
purely civilian or dual-use transfers. As a result, dual-use trade has
steadily increased over the years to represent a sizeable portion of external
trade[8].
Its
wide-ranging sector and product ramifications create
operational challenges due to the growing volume and diversity of
applications.
Export
controls represent a key competitive factor, as Europe's economy
shifts towards innovative high value-added manufacturing, and European
value chains are integral parts of global value chains. In
this context, differentiated levels of controls in third countries create
distortions of competition to the detriment of EU companies operating
globally. Also, some remaining divergent control parameters and instances
of "asymmetric implementation" of controls may occasionally
affect the consistent implementation of controls and the level-playing
field within the EU.
3. Beyond materiality and
borders: towards an integrated risk-based strategic trade control system.
With
the current
export control regime, the EU has tried to strike a balance between security
and trade. The system is generally considered robust and
effective and
provides solid legal and
institutional foundations. But it cannot remain
static: it must be re-evaluated and upgraded in order to face
new challenges
and generate
the modern control capabilities the EU needs for the coming decade and beyond.
This could be achieved by giving new impetus to the development of
an integrated risk-driven strategic trade control model, based on the following
directions:
A risk-based
review of the balance between the necessity of trade regulation and the
reduction of regulatory burdens to ensure that legislation is clear and proportionate.
Non-regulatory actions - guidelines, pooling of resources etc. - could
also be envisaged to equip the EU control regime with flexible tools to
respond to new challenges while ensuring a level playing field in the EU
internal market.
An
integrated approach to enhance the coherence of all export control "pillars"
(legislation, pre-licensing, implementation, enforcement, outreach)
through
the development of a common EU control network supporting
a greater
focus on consistent implementation and enforcement with a view to reducing
distortions of competition and improving security.
Transparency
and engagement with stakeholders and a more prominent role for the private
sector would be key to an integrated approach allowing operators to fully
play their complementary roles, thereby optimising the use of resources
and supporting effective compliance.
Proliferation
is carried out in an international context and export control policy needs
to include an international dimension.
The
development of an integrated system would allow more active EU external action,
strengthening multilateral processes that constitute the core of the global
export control system while also providing a basis for mutually beneficial
relations with key partners. This, in turn, would strengthen the EU's own
security.
3.1. Priority 1: Adjust to
an evolving security environment and enhance the EU contribution to
international security
The EU export
control system must
respond
to shifting foreign policy considerations and keep pace with new approaches
to security. It needs to integrate the security implications of an
ever growing number of emerging technologies and a broader
range of dual-use items, in order to ensure their peaceful use. It needs to move
beyond the increasingly artificial divide between internal and external
security and tackle evolving proliferation risks
that move across borders and jurisdictions. ·
The
Commission will consider evolving towards a "human security"[9]
approach recognising
that security and human rights are inextricably interlinked. This
may involve evolving towards a notion of 'strategic' items addressing not only
and strictly, items with possible military and WMD proliferation end-uses, but
taking a wider security approach. This may also imply a clarification of
control criteria to take into consideration broader security implications,
including the potential effect on the security of persons e.g. through
terrorism or human rights violations. This approach would also strengthen the
coherence with other security trade controls and converge with international
trends, e.g. the Arms Trade Treaty (ATT)[10] and
the UN Firearms Protocol. ·
The
Commission will consider developing a "smart security" approach to
adjust to the transformations of dual-use items and
the proliferation of new technologies and address the increasing complexity of
the international supply chain. This may involve consideration of the following
options:
Development
of an "EU technological reaction capacity" for an active contribution
to the highly technical discussions of control lists, but also to ensure
rapid reaction to the challenges posed by emerging technologies (such as
cloud
computing, additive manufacturing
(3-D printing), nanotechnology) as well as de-control
of items that have become obsolete or widely
available commercially. This mechanism could build upon the expertise
available within export control authorities and on structured engagement
with industry. It may also imply developing
guidance where technologies represent a key development for business that
presents risks and calls for transparency, legal clarity and a common approach.
Design of an
effective EU response to the use of cyber-space for proliferation
activities and clarification of controls of cybertools[11].
This may imply EU actions to promote multilateral decisions on cyber-tools,
or alternative options such as the introduction of EU autonomous lists or
a dedicated catch-all mechanism, without hindering the competitiveness of
the EU information and communication technology (ICT) industry and its integration
into global supply chains.
Modernised
control approaches addressing the porosity of legal and illicit trade may include options for strengthening the legal basis
and upgrading certain control modalities in order to cover all aspects and
actors in the chain of controls and address divergent applications of
controls and related vulnerabilities. This may involve clarifying the notion
of export and exporter to capture the variety of activities and actors
involved in global supply chains, reviewing the determination of the
competent authority (especially for non-EU companies), updating the
control of technical assistance, enhancing the consistency and enforcement
of brokering and transit controls as well as introducing specific legal
provisions to counter circumvention and address transactions involving EU
persons irrespective of their location. Furthermore, options regarding the
introduction of new control modalities and the partnership with the private
sector could contribute to shifting emphasis on end-use monitoring and facilitate
legitimate exports and the detection of illicit trade.
·
The
Commission could examine options to promote a specific strategy to ensure
"immaterial control" and address the challenge posed by Intangible
Transfers of Technology (ITT), including the need to clarify the control
of 'dual-use research', while avoiding undue obstacles to the free
flow of knowledge and the global competitiveness of EU science and technology.
The clarification
of the legal framework applying to ITT may involve reviewing legal
provisions and/or providing guidance relating to basic notions applying to
electronic transfers of controlled technology. It may also concern the control
modalities and the introduction of specific tools to facilitate the free
flow of technology (e.g. EU General Export Authorisations (EUGEAs) for
intra-company research and development) while enhancing ITT traceability
and enforcement through an approach shifting the focus on pre-transfer
control provisions - e.g. registration, self-auditing - and post-transfer
monitoring - e.g. compliance audits - rather than on the transmission
itself;
Targeted
and coordinated outreach for academic research communities throughout the EU
could raise awareness about applicable rules and promote effective
implementation by scientists
and laboratory workers. Other options such as the preparation of a code of
conduct for scientists engaged in the performance of dual-use research
could also be envisaged.
3.2. Priority 2: Promote export
control convergence and a global level-playing field
In spite of the
growing international recognition of export controls, differentiated control
standards in third countries create distortions of competition and weak links
in the global supply chain that proliferators can take advantage of. EU policy
should therefore promote convergence towards global and effective controls for
global supply chains, in order to remove the challenge for industry of
concurrent compliance with differing regulations and support a level playing-field.
The
Commission could consider setting up an effective mechanism for a regular
update of EU control lists drawing on expertise from national authorities,
to ensure that control lists are in tune with technological
and commercial developments and minimise distortions of competition associated
with outdated controls.
Although the
EU licensing architecture is generally considered satisfactory, licensing
processes continue to impact competitiveness. The Commission will therefore
seek ways to optimise the licensing architecture and processes in
order to avoid burdensome licensing procedures
and to minimise delays and distortions
of competition. This could include options for the:
o
Introduction
of a system for a regular review of National General Export Authorisations (NGEAs)
and discussion of their possible transformation into EUGEAs and extension to
the whole EU; o
Shift
towards open licensing through the introduction of additional EUGEAs, reviewing
the balance between efficiently acting to counter proliferation and reducing the
burden for licensing authorities and exporters through a proportionate level of
control, e.g.: § "Low
Value Shipments" to facilitate export of small quantities of items presenting
a low proliferation risk; § "Encryption",
to allow the export of ICT items which are widely used in industrial processes
and operate in a highly competitive environment; § "Intra-company
technology transfers" for research and development purposes; § "Intra-EU
transfers" for Annex IV items[12],
allowing for control modalities that do not hinder the free-flow of goods and
technology within the Single Market; § "Large
projects" allowing authorities to look at the "bigger picture"
rather than an accumulation of individual licensing applications. o
Review
of the parameters (destinations, items) for existing EUGEAs to ensure that they
are up-to-date, and harmonisation of some licensing conditions and requirements
in order to promote consistent implementation throughout the EU, including the
validity period of individual licences and of denials. Preparation of
guidelines for consistent licensing practices, including best practices e.g. on
processing times, could also be considered.
The Commission
will assess options to promote the global convergence of export controls
with a view to facilitating trade in dual-use items. This could include actions to promote coherent, comprehensive and unified
EU representation in the regimes[13] as a reflection of its role in counter-proliferation and trade. It could also involve pursuing active external outreach
and cooperation to assist partner countries in developing convergent
regulations, as well as developing export control dialogues with key
trading partners with a view to avoiding conflicting regulatory
requirements and reducing the administrative burden on export-oriented
industries.
3.3. Priority 3: Develop an effective and
competitive EU export control regime
The multilevel
structure of EU export controls provides for a unique and flexible system, but instances
of divergent application may occasionally compromise their overall
effectiveness. The Commission should thus assess
options to address
the "asymmetric implementation" of controls in order to minimise
distortions of competition and transactions costs associated with controls within
the EU. ·
Divergent
control decisions are often attributed to a perceived lack of harmonised EU
export control policy and especially to a divergent risk assessment underlying
control decisions. A risk-based approach, based on the development of a common
risk management framework could ensure greater consistency in the
identification of high-risk transactions while optimising the EU-wide use of
resources and reducing distortions of competition due to divergent control
decisions. ·
Catch-all
controls[14]
remain essential tools to prevent the use of non-listed items for
proliferation, but uneven implementation has raised concerns in terms of legal clarity,
distortions of competition and potential weak links in the chain of controls. A
greater convergence could be achieved through the harmonisation
of the notion of catch-all controls and the strengthening of consultation to
ensure their EU-wide application and reinforce a policy of no-undercutting. This
could be supported by regular exchange of information and the establishment of an
EU catch-all database. Some information could be shared with customs and other
agencies in order to enhance enforcement, or be made available publicly. Transparency
can support operators' due diligence to ensure that the supply chain is secure.
·
The
Commission could assess options for a critical re-evaluation of intra-EU
transfer controls in order to minimise remaining barriers in the Single Market,
while keeping strict controls on the most sensitive dual-use items. This could
include a review of Annex IV to focus on an updated list of most sensitive
items and/or the introduction of an EUGEA for intra-EU transfers, including
technology transfers. Appropriate conditions and requirements, including options
for post-shipment verification within the EU, could be designed to compensate
for the removal of pre-transfer licensing and to ensure the security of
transfers and the availability of information.
3.4.
Priority 4: Support effective and consistent export control implementation &
enforcement
Export control
policy should not only focus on setting rules for the control of legitimate
trade, but also consider the pre-emption and disruption of illicit trade. Consistent
implementation and enforcement across the EU is essential to address the risk
of evasion of control processes, but a lack of solid EU-wide
statistics and intelligence still hampers effective policy and operational
responses. The Commission will review the following options to develop a more
integrated implementation and enforcement framework: ·
With
over 40 000 applications per year, export controls are demanding in terms
of administrative resources within control authorities. The development of an EU
export control network could strengthen the overall capacity of the system
while optimising the use of resources and keeping administrative costs under
control, through the following options:
Enhanced structured
exchange of information between export control authorities on
licensing data as well as other relevant information (e.g. destinations,
end-users, incidents and violations) could allow access to critical
information for all competent authorities, based on clearly identified
needs in order to avoid information overload. The secured IT
infrastructure "DUeS"[15]
could be expanded to support enhanced information sharing.
Enhanced
strategic and operational cooperation with enforcement agencies, e.g.
customs, could be achieved by ensuring integration of export
control priorities in relevant policy cycles[16],
by sharing information through an EU-wide exchange system, developing
common risk management tools and implementing joint operations. Targeted information
exchange on enforcement activity would allow a better strategic overview
of the effectiveness of controls across the EU and the sharing of best
practices, and could feed back into policy formulation e.g. for the
detection of illicit trade.
Improved coherence
between different EU institutions and Member States and the identification
of
synergies between security-related trade control instruments,
e.g. through the development of a common IT infrastructure as a shared
platform to support exchange of information across the EU, could increase
the overall impact of EU counter-proliferation actions.
Coherence with other closely-related EU policies and regulations, e.g.
under the EU Action Plan on chemical, biological, radiological and nuclear
security, Regulation (EU) N° 98/2013 on explosive precursors and
Regulation (EU) N° 258/2012 on firearms should also be ensured.
The past
decade has seen extensive capacity-building on WMD-related matters,
including significant export control outreach programmes to third
countries, while initiatives within the EU are still at their early
stages. The development of a targeted EU-wide capacity-building
programme and training for relevant officials, including customs
and border agencies, could increase capacity to prevent and detect
cross-border trafficking of strategic items. The
pooling of expertise e.g. through the further development of the "Pool
of experts", could also strengthen the EU chain of control.
·
In
modern economies, the private sector plays the most crucial role in the control
chain. Therefore, partnerships with the private sector could greatly
enhance the security and resilience of the global supply chain. Operators
are well-placed
to spot illicit trade and protect sensitive technology, while uneven
trade compliance creates trade distortions and opens opportunities for the
exploitation of weak points in supply chains. The creation of these conditions
relies on better coordination and understanding between governments and the
private sector
and could imply various actions such as:
Compliance efforts could be recognised through
the facilitation of control and fast-track export
processes
by setting clear private sector compliance
standards for use of simplified mechanisms (such as EUGEAs, NGEAs, Global Licences) as a substantial
privilege granted to reliable exporters. This may include legal requirements and/or guidelines for
operators
to
identify, manage and mitigate their risk of exposure to proliferation by
undertaking enhanced vigilance for items of high proliferation concern through
due-diligence
and disclosure requirements, including the reporting of suspicious
transactions. While costs for business should be minimised and
self-regulation encouraged, standard requirements for 'Internal Compliance Programmes'
(ICPs) could support a level-playing field within the EU. Compliance and
competitiveness are mutually reinforcing, as compliance reduces
the risk of inadvertent supply of dual-use items to programmes of concern
that exposes firms to penalties and reputational damage.
Furthermore, options to promote convergence with customs'
"trusted operators" programme
(AEO) could reduce duplication of controls and offer cost-effective
avenues for both operators and administrations.
Transparency
and
coordinated outreach could be critical steps to provide clarity on
requirements, support operators'
compliance efforts and improve their capacity
to implement controls, thereby
creating conditions in
which each element of the supply chain is
resistant to "contamination" by illicit trade. This could
involve the
publication of reports
and non-sensitive control information, including guidance promoting
good compliance practices.
The
development of common EU support tools for economic operators e.g. standardised IT tools and
electronic licensing systems, could also support
compliance efforts by companies.
·
Export controls reflect international commitments and represent
a key safeguard for the integrity of international trade and it is therefore
essential to enhance their global effectiveness. Options for the co-operative implementation of controls with external
partners could be examined to facilitate a secure trade in strategic items,
e.g. through the development of end-use monitoring of third-country companies,
as well as the mutual recognition of assessments.
4. Conclusion
Economic
operators, Member States and citizens in the EU all have an interest in
effective export controls, ensuring security by combating illicit trade while
facilitating legitimate trade. An updated EU approach and regulatory framework
will reinforce the security and integrity of the supply chain. This will
require a more systematic exchange of risk information and coordination between
licensing and other authorities as well as engagement with the private sector
and closer international cooperation. Before taking
concrete initiatives for action, the Commission invites the Council and the
European Parliament to consider the approach set out in this Communication. In
parallel, the Commission will conduct an impact assessment of the review
options outlined in this Communication to identify the most suitable regulatory
and non-regulatory actions to bring them into effect. With reference to REFIT,
the Commission will assess the costs and benefits associated with the various
options, notably as regards potential regulatory simplification and burden
reduction. _______________ List
of acronyms ATT || Arms Trade Treaty DUeS || Dual-Use Electronic System EU || European Union EUGEA || EU General Export Authorisation ICP || Internal Compliance Programme ICT / IT || Information (and Communication) Technology ITT || Intangible Technology Transfer NGEA || National General Export Authorisation REFIT || Regulatory Fitness and Performance Programme WMD || Weapons of Mass Destruction UNSCR || United Nations Security Council Resolution [1] OJ L 134, 29 May 2009,
p. 1. [2] Council
Conclusions on ensuring the continued pursuit of an effective EU policy on the
new challenges presented by the proliferation of weapons of mass destruction
(WMD) and their delivery systems, 21 October 2013. [3] COM(2011)
393 of 30 June 2011. [4] SWD(2013)7 of 17
January 2013. [5] COM(2013) 710 of 16
October 2013. [6] Intangible
technology transfer includes both the transfer of technical information via
electronic means and the transfer of knowledge and skills by persons. [7] C(2012) 4890 final on access to and preservation of scientific information. [8] EU controlled dual-use
exports are estimated to value approximately 2.5% of EU total exports. For more information
on EU dual-use trade, please refer to COM(2013) 710 final. [9] The "human security
approach" intends to place people at the heart of EU export control
policy, in particular by recognising the interlinkages between human rights, peace
and security. [10] The ATT aims at
reducing illicit arms trade by setting transparency rules and common ethical
standards for the international trade of conventional weapons. [11] See as well the joint
communication to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions on "Cybersecurity
Strategy of the European Union: An Open, Safe and Secure Cyberspace",
JOIN(2013) 1 final, 7 February 2013. [12] Annex IV to
Regulation (EC) N° 428/2009 lists particularly sensitive dual-use
items subject also to intra-EU transfer
controls. [13] See, for example,
General Arrangements on EU Statements in multilateral organisations,
doc.15901/11, 24 October 2011 [14] So-called
"catch-all controls" apply to non-listed dual-use items with
potential military or proliferation end-use. [15] Dual-Use Electronic System [16] In relation
specifically to customs, the development of a new Strategy and Action Plan
on risk management and supply chain security requested by the Council on 18th
June 2013 provides a key opportunity to consider how an enhanced Common Risk
Management Framework for customs controls can best be exploited to support
customs-licensing collaboration, enforcement and trade facilitation for the
future.