Technology transfer in export controls: what you need to know

The Dual-Use Regulation (EU) 2021/821 – which took effect on September 9, 2021 – is the legal basis for all questions relating to export controls of civilian goods in the EU. The new EU Dual-Use Regulation is still focused primarily on the export of goods, offering little insight into questions about the rapid developments of technology transfer in a digitally interconnected business world.

Export controls in the context of the Dual-Use Regulation most typically involve a requirement for authorization to export the dual-use items listed in Annex I as set forth in Art. 3 (1) of the EU Dual-Use Regulation. 

There are no exceptions to the requirement for authorization to export dual-use items. 

Annex I of the EU Dual-Use Regulation is a technical list describing dual-use items subject to authorization based on their specific technical parameters. All goods that have the technical specification mentioned in the goods descriptions of Annex I are subject to export controls as dual-use goods.

The only way for a business to comply with the authorization requirement of Art. 3 of the EU Dual-Use Regulation for listed technology is to first classify its goods based on the list of dual-use items in Annex I. This makes it clear that a reliable export control regime depends on list screening.

The classification of goods is a strictly technical check. Classifying goods under the dual-use control list means comparing the technical attributes of the goods to be classified with the those described in the control list. A common mistake is to include the known use or simply the mere possibility of use in the goods classification.

This approach leads to huge uncertainties, since the same goods are classified differently based on their use. That’s why it’s important to classify goods as the law requires, without considering the recipient or use.

Before we look at what's special about the classification of technology, let’s first define the term "technology" as it applies to the EU Dual-Use Regulation. In the definitions of terms under Annex I of the EU Dual-Use Regulation 2021/821, technology is defined as "specific information necessary for the development, production, or use of goods." 

This definition is the basic starting point for the classification of dual-use technology. Under this definition, only technology for the development, production, or use of listed goods is cited.

The connection between goods, software, and technology is often overlooked in practice. This then gives rise to uncertainties and, not infrequently, significant overregulation of technology exports.

The fact that technology must always be seen in the context of the listed goods becomes clear from the structure of the dual-use item numbers. The letters A, B and C (second digit of the dual-use item number, see 3A225 above) describe goods. The letter D covers software related to the listed product, and the letter E refers to the associated technology.

Under this system, companies that don’t have any dual-use items in their portfolio never have any dual-use technology that would require an export authorization under Art. 3 of the EU Dual-Use Regulation. Non-listed goods must undergo a catch-all check per Art. 4 of the EU Dual-Use Regulation and Section 9 of Germany’s Foreign Trade and Payments Ordinance (AWV).

If there is any uncertainty as to whether a given technology is listed, it’s a good idea to inquire with the relevant export control authority.

The term "export" is defined in Art. 2 (2) of the EU Dual-Use Regulation. The essential characteristic of an export is the shipment of goods across the external EU border. All shipments to non-EU countries are exports within the meaning of the EU Dual-Use Regulation. The physical export of technology is easy to determine. If the listed technology is contained in a blueprint, for example, then an export occurs when the blueprint crosses the border into a non-EU country.

Technology transfers in business are often electronic rather than physical. The definition of an export in the EU Dual-Use Regulation also covers electronic exports. The manner in which technology is transferred is not important in determining whether an export has taken place. Under Art. 2 (2) (d) of the EU Dual-Use Regulation, the transmission of technology by electronic media such as fax, telephone, electronic mail, or any other electronic means to a destination outside the EU is also an export. This includes making technology available in electronic form to people outside the EU.

According to the definitions in Annex I of the EU Dual-Use Regulation, the specific technical knowledge defined as technology must be embodied in "technical assistance" or "technical data." 

Technical assistance is illustrated in the notes with examples that include instructions, training, and working knowledge, while technical data is described as including blueprints, plans, and models. 

This means that technology transfer includes both the export of technology and the transfer of knowledge. When it comes to the requirements for authorizations, a strict distinction must be made between technology transfer in the form of technology export and technology transfer in the form of technical services.

Technical assistance within the meaning of the EU Dual-Use Regulation is defined in Art. 2 (9) as "any technical support related to repairs, development, manufacture, assembly, testing, maintenance, or any other technical service." It can take forms such as instruction, advice, training, transmission of working knowledge or skills, or consulting services, including by electronic means as well as by telephone or any other verbal forms of assistance.

The provision of technical assistance pursuant to Art. 8 (1) and (2) of the EU Dual-Use Regulation requires authorization only if the technical assistance is provided for dual-use items listed in Annex I and the provider has been informed or is aware by the competent authority that the items in question are or may be intended, in their entirety or in part, for any of the uses referred to in Art. 4 (1) of the EU Dual-Use Regulation.

The relevant factor determining whether a technical service requires authorization is not the export defined in Art. 2 (2) of the EU Dual-Use Regulation, it is the provision of technical assistance. Art. 2 (10) of the Dual-Use Regulation defines the place of performance – the place where the result of the technical assistance is achieved – and the recipient of technical assistance subject to approval.

Art. 2 (10) of the EU Dual-Use Regulation defines the "provider of technical assistance" as any natural or legal person

• that provides technical assistance from the customs territory of the Union into the territory of a third country;
• resident or established in a Member State that provides technical assistance within the territory of a third country; or
• resident or established in a Member State that provides technical assistance to a resident of a third country temporarily present in the customs territory of the Union.

Art. 4 (1) of the new Dual-Use Regulation covers use in connection with chemical, biological, and nuclear weapons, including missiles capable of delivering such weapons (Art. 4 (1a)), military end-use in a country subject to an arms embargo (Art. 4 (1b)), and use as parts or components of military items exported without authorization (Art. 4 (1c)).