Netherlands: Export Restrictions Part I: What are export restrictions? - Boels Zanders
When exporting goods from the Netherlands to countries inside and outside the European Union (EU), national and international rules, legislation, export controls and customs formalities apply. This is something you may have to deal with as an entrepreneur. But what exactly are export restrictions, to whom do they apply and why is it important to be aware of them and to act accordingly? That is explained in this blog series.
The intention is to inform you as an entrepreneur about the reasons and the necessity for being aware of possible export restrictions and also to prevent problems in your company in the case of actions contrary to these export restrictions. An effective compliance protocol can help.
This first part of the blog series explains what export restrictions are. In the second part, we will consider the legal consequences of transgression. This will be followed by a focus on the companies subject to these restrictions. In the fourth part, the usefulness and necessity of export compliance will be explained, and finally, we will examine the specific contents of an effective export compliance protocol.
Companies that export goods to countries outside the EU frequently encounter export restrictions. Export restrictions are all restrictions imposed on the export, import or transit of strategic goods and services on the basis of treaties, international agreements, laws and directives. Under Regulation (EC) No 428/2009, exports from the EU of strategic goods or services are subject to licensing. These national and international rules and export controls are related to limiting the international distribution of sensitive goods. Think of dual-use goods or military goods. The purpose of these rules is to prevent goods or services from falling into the wrong hands.
In addition, sanctions may be applied to countries or individuals. Sanctions are political instruments in the foreign and security policy of the United Nations and the European Union. The most common sanctions are arms embargoes, trade restrictions, financial sanctions (freezing of assets) and travel and visa restrictions. The restrictions that apply in the Netherlands are included in the Dutch Sanctions Act 1977 (Sanctiewet 1977).
The United Nations (UN) and the European Union (EU) impose international sanctions. They do this against countries, organisations, companies and individuals. For example, in case of a threat to international peace and security. The EU can also impose sanctions to stand up for peace, international security, human rights, respect for international law, democracy and the rule of law. The purpose of such sanctions is to change the undesirable behaviour, to make it more difficult to show this undesirable behaviour and to deter others from showing the same undesirable behaviour. The sanctions that the UN and the EU can impose are:
- financial sanctions, for example the freezing of bank accounts or restrictions on financial transactions abroad and on investment;
- trade restrictions, an example being a total or partial ban on trade in special products or related technology;
- arms embargoes;
- travel and visa restrictions for certain persons.
Strategic goods and services
One of the main objectives in controlling the export of strategic goods is to prevent the proliferation of weapons of mass destruction, such as nuclear weapons and the goods, technology and services needed to develop them. The restrictions not only apply to physical goods, but can also apply to technical data, software and services.
The restrictive measures for these strategic goods and services fall broadly into five categories: 1) military goods; 2) dual-use goods; 3) strategic services; 4) torture goods and services; and 5) chemical weapons. These categories are explained below.
1) Military goods
Military goods are goods that are used for purely military purposes, e.g. guns. Military goods are included and defined in the Common Military List of the European Union. A licence is required for the export of these goods. The assessment of whether military goods may be exported is made on the basis of a number of criteria set out in the EU Common Position on Arms Exports. Individual Member States must ensure that their national legislation enables them to control the export of the goods and technology on the EU Common Military List. In the Netherlands, the Customs department, the Central Import and Export Service (CDIU) monitors this and grants the licences.
2) Dual-use goods
Dual-use goods are goods or services that are normally used for civilian purposes but which may also have a military application. As a result of this legislation, relatively simple and ‘innocent’ goods still fall in some cases under the dual-use rules. An export licence is then required. Effective screening is particularly important for this category of goods and services.
Dual-use goods include both goods (hardware) and services such as installation of technology, software, financial services, etc.
The regulation of dual-use goods is set out in Regulation (EC) No 428/2009. This regulation has recently been amended (Regulation (EU) 2021/821) and will enter into force in September 2021.
Annex I of Regulation (EC) No 428/2009 lists the dual-use goods and services for which an export authorisation is required. The goods are divided in Annex I into the following categories: nuclear materials, facilities and equipment, special materials and related equipment, materials processing, electronics, computers, telecommunications and ‘information security’, sensors and lasers, navigation and avionics, marine, aerospace and propulsion. The list in Annex I to the Regulation will be updated regularly. The CDIU is also responsible for applying for a licence to export these goods.
3) Strategic services
Strategic services are services related to strategic goods. These are: non-physical transfer of software technology, for example by telephone or by e-mail; the provision of technical assistance and brokerage services. These services are included in the Dutch Strategic Services Act (Wet strategische diensten). A licence is required for these services too. This can be requested from the CDIU.
4) Torture goods and services
The goods that qualify as torture goods and services are listed in EU Regulation 2019/125, also called the EU Anti-Torture Regulation. There is a total prohibition on the export and trade of torture goods listed in Annex II of the Regulation. It is therefore not permitted to trade in these goods or provide services in relation to them. There is only one exception to this rule, namely for exhibiting these goods in museums. There are also goods that can be used both for torture purposes and for normal (e.g. medical) purposes. A licence is required for these goods. Annexes III and IV list the goods that require a licence. The provision of technical assistance and brokerage services in relation to these goods is also subject to licensing and therefore control.
5) Chemical weapons
The Chemical Weapons Convention subjects certain activities involving substances on the military list and dual-use goods to strict control. The import and export of substances listed in the Convention are subject to control or approval.
The control of exports of strategic goods is the focus of international attention. Their collection and combination can lead to undesirable effects, such as developing weapons of mass destruction or contributing to acts of terror. For many of these types of goods, it is clear that they are strategic goods or services. This is not always the case. Think, for example, of the supply of individual parts and materials that can be used in a weapon. Technological devices can also be used with a view to terrorism. This is especially true for dual-use goods and services. Not every company is aware of the risk of the product being supplied and how it can be used and by whom. Consequently, screening and classification of products, the end use and the buyer are very important.
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