Regulatory Outlook: Export Control and Sanctions
Current issues: February 2019
No deal technical notice on export control regulation
On 19 December 2018, the UK government updated its technical notice on how export controls would be affected if the UK leaves the EU with no deal.
The key impact for the export of dual-use items is that the movement of items from the UK to the EU would require an export licence (in the same way as is currently required for non-EU destinations). To avoid business disruption, the Export Control Joint Unit (ECJU) has published new Open General Export Licence designed specifically for exports to EU countries (as explained in further detail below).
No deal technical notice on sanctions
The UK government has also published a technical notice on the UK sanctions regime in the event of a no deal Brexit.
The notice confirms that the UK will continue to implement all UN sanctions in UK domestic law, and will carry over all EU sanctions as at the date of Brexit.
Thereafter, the UK will have a standalone power to implement sanctions under the Sanctions and Anti-Money Laundering Act 2018.
Businesses will therefore need to ensure that as well as complying with UN and EU sanctions, they also comply with any other applicable UK sanctions.
ECJU guidance on the “Cryptography Note”
The ECJU has published guidance to assist exporters to make their own assessment on the application of the “Cryptography Note”, which works to exempt items from controls provided that certain conditions are met (for example, that the goods can be easily acquired by the general public).
This new guidance is important for both existing exporters of items incorporating cryptographic functionality (who should re-assess their products against the new guidance), and exporters looking to self-assess new dual-use items prior to export.
ECJU reintroduces control list classification advisory service
The ECJU has reintroduced a control list classification advisory service.
This service is for the assessment of goods and technology against the UK strategic control export control list.
Its return is good news for companies, which will have recently had to attempt to self-classify their goods for export so as to ensure compliance with the UK export control legislation.
In Focus: No deal Brexit
What would be the impact of a no deal Brexit for UK businesses trading with the EU?
Current regulations on the export of dual-use items would continue to apply (to exports from the UK) in the same way as they do now (to exports from the EU Customs Territory).
However, there would be changes to current licensing requirements (which do not mandate a licence for the majority of intra-EU exports of dual-use items). For example:
- the movement of dual-use items from the UK to the EU would require an export licence from the ECJU (the UK export control regulator); and
- export licences issued by remaining EU Member States would no longer be valid for exporting dual-use items from the UK.
Consequently, under a no deal Brexit, UK businesses exporting dual-use items to the EU would need to register for new licences to maintain compliance with dual-use controls.
What would be the impact of a no deal Brexit for non-UK businesses trading with the UK?
As of the exit date, the UK would be recognised as a ‘third country’. Exports of dual-use items from the EU to the UK would therefore require a licence to legitimise that export. In addition, licences issued by the ECJU would no longer be valid for exporting dual-use items from EU Member States – either to the UK or to a third country.
In a Communication published on 19 December 2018, the Commission confirmed that it would implement a Regulation to add the UK to the list of countries for which a general authorisation to export dual-use items is valid throughout the EU (referred to as EU001).
What should businesses be doing now to prepare for a no deal Brexit?
As part of wider Brexit-readiness activity, businesses should:
- conduct an audit to identify: (i) the extent of their existing (and proposed) UK-EU and EU-UK dual-use exports; and (ii) the country of origin of the licences they intend to continue using post-Brexit;
- for identified UK exports to the EU, be ready to register to use the new Open General Export Licence;
- for identified EU exports to the UK, be prepared to register in a remaining EU Member State for a general authorisation to legitimise the export of dual-use items to the UK;
- for identified exports where an individual, rather than an open, licence is required (for example, because the shipment is a one-off / customer-specific), be prepared to apply for those licences in advance of the withdrawal date from: (i) the UK (for UK-EU exports); or (ii) a remaining EU Member State (for EU-UK exports); and
- for existing licences which they intend to use following the withdrawal date, ensure that those licences will remain valid.