No deal Brexit and UK/EU exports of Annex 1 dual-use controlled goods
1 October 2019
Introduction
If there is no Brexit deal prior to October 31st 2019, then certain list-controlled goods, technology and software will need export authorisation when exported from the UK to any European Union (EU) member state, and similarly from any EU member state to the UK.
At present, less sensitive dual-use goods, technology and software controlled by Annex 1 to Council Regulation (EC) No 428/2009 [1] can move freely between EU member states subject to the requirements of Article 22(10), which requires the related commercial documents to indicate that those goods are subject to exports controls if subsequently exported from the EU. Sales contracts, invoice, dispatch notes, confirmation of order are all considered to be acceptable commercial documents for this purpose. [2] In the event of a no deal Brexit, then exporters of dual-use goods, technology and software as described above will be required to obtain an export licence prior to exporting.
Exports from UK to EU (Including the Channel Islands)
On 1st February 2019, the UK Export Control Joint Unit (ECJU) published an Open Export Licence (export of dual-use items to EU member states) [3] in anticipation of the UK leaving the EU without a trade deal, and it has been possible for exporters to register for this licence since its publication using the ECJU’s online portal SPIRE. [4]
Exporters of dual-use goods should already know whether or not their items (tangible items) are Annex 1 dual-use controlled, as they are currently required to comply with (Article 22(10)) of the dual-use regulation.[5]
Exporters will need to ensure that they have the necessary processes and procedures in place to comply with the requirements of the new OGEL. In particular, they will need to ensure that their items properly classified (ECCN), and that the accompanying export documents make proper reference to the export licence (as detailed in the licence). [6]
Exporters will also need to ensure that details of each licensed shipment are declared properly declared through the Customs Handling of Import and Export Freight (CHIEF)* system which advises Customs of the export declaration. [7]
CHIEF allows exporters (usually via their freight forwarders) to complete a Customs declaration electronically, and it provides exporters with necessary documentary evidence of the export, which the exporter should file for ECJU audit purposes. Exporters must ensure that they ‘retain certain records relating to each such export for at least three years from the end of the calendar year in which the export takes place’ [8]
Exporters should be aware that a British Chambers of Commerce initiative called ‘Chamber Customs’ was recently launched, and will see chambers providing customs entry services to meet the significant increase in demand following a no deal Brexit. It is anticipated that the ‘Chamber Customs’ service will be available from November 2019.
*Customs Handling of Import and Export Freight (CHIEF) is to be replaced by the Customs Declaration Service (CDS), although this is not likely to happen until the middle of 2020.
Exports from EU to UK
Equally, Annex 1 dual-use controlled goods will become licensable within the EU when exported to the UK. The EU will therefore amend the existing Union General Export Authorisation 001 (UGEA 001) to include the UK. Currently, the UGEA 001 permits exports of most Annex 1 dual-use items to Australia, Canada, Japan, New Zealand, Norway, Switzerland (including Lichtenstein) and the United States of America. EU exporters must be aware that the UGEA 001 does not permit exports for WMD end-use applications, or to a customs free zone or free warehouse located in a destination covered by authorisation. [9]
Exports from the UK to Australia, Canada, Japan, New Zealand, Norway, Switzerland (including Lichtenstein) and the United States of America.
Should there be a no deal Brexit on October 31, 2019 then the Union General Export Authorisation 001 (UGEA 001) [10] in its current draft will no longer be available to UK exporters of Annex 1 dual-use controlled items, as the UGEA 001 is a European Union licence. As such, these items will require an alternative method of licensing when exported to Australia, Canada, Japan, New Zealand, Norway, Switzerland (including Lichtenstein) and the United States. The UK Export Control Joint Unit (ECJU) has indicated that it may simply transfer the UGEA 001 into UK domestic law and make any necessary drafting changes, and that this licence in its revised UK draft will be issued automatically to existing UK holders of the European UGEA 001. However, at present the ECJU has not formally issued a ‘notice to exporters’ advising them of this proposal. In the event that the ECJU does not reissue this licence in a revised UK format (albeit unlikely), then the only method of licensing Annex 1 controlled goods come October 31st, 2019 will be to request a Standard Individual Export Licence (SIEL) through the UK governments SPIRE portal [11], taking the ECJU on average 20 working days to process the application following submission, and requiring original hard copy end-use documents.
Conclusion
Traders should ensure that they are fully prepared for a no deal Brexit.
Traders should confirm that their goods are properly classified for export control reasons. UK exporters of dual-use should register with SPIRE in order to use the UK’s new Open Export Licence (export of dual-use items to EU member states), prior to exporting Annex 1 dual-use controlled goods to any EU country, as well as establishing proper processes and procedures in order to fully comply with the conditions of this new licence. Similarly, exporters in EU member states will need to ensure that they are registered with the relevant EU authority for use of the UGEA 001 if they wish to export Annex 1 controlled goods to the UK.
References
[1] https://eur-lex.europa.eu/legal-content/GA/TXT/?uri=CELEX:32009R0428#d1e32-12-1
[2] https://eur-lex.europa.eu/legal-content/GA/TXT/?uri=CELEX:32009R0428#d1e1057-1-1
[4] https://www.spire.trade.gov.uk/spire/fox/espire/LOGIN/login
[5] https://eur-lex.europa.eu/legal-content/GA/TXT/?uri=CELEX:32009R0428#d1e1057-1-1
[7] https://www.gov.uk/guidance/chief-trader-import-and-export-processing-system
[9] https://eur-lex.europa.eu/legal-content/GA/TXT/?uri=CELEX:32009R0428#d1e32-253-1
[10] Ibid
[11] https://www.spire.trade.gov.uk/spire/fox/espire/LOGIN/login
Andrew Skinner is a solicitor practising international trade law, including export controls and sanctions, anti-bribery and corruption, and customs law.
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