As we seemingly move closer to exit day (currently fixed for 31 October 2019 at 11pm GMT), and if you haven’t already done so, now is a good time to review what’s been done to prepare the UK’s export controls system for Brexit.
This update is part of a two-part series on the impact of Brexit on economic sanctions and export control matters. The first update is on economic sanctions after Brexit.
What are the key changes?
While the UK is still part of the EU, most of the legislation applicable to export rules is based on EU law. The key changes to export rules as a result of Brexit broadly fall into two categories:
• changes to licensing processes and applicable licensing authorities in relation to trade involving the EU; and
• the potential for divergence between the EU and UK’s approach to export and sanctions regulation in a post-Brexit future.
This update is therefore most relevant to businesses that operate internationally or export goods or services to or via the EU. It may also be relevant to businesses that import goods or services from the EU.
What’s been done so far to prepare the UK’s export controls system for Brexit?
Following Brexit, the UK will cease to be a member of the EU and, in the event of a no-deal exit, for export control purposes will be treated as a non-Member State, or ‘third country’, on exit day. This means that exports from the UK to or via the EU, and EU businesses exporting to the UK, would immediately be subject to different export controls.
The current UK law on export is a patchwork of legislation, some of which implements EU law (for example, controls on goods that have both a civil and military use; so called ‘dual-use’ items), some of which is purely domestic UK law and some of which implements agreements under other international treaties (for example, the Wassenaar Arrangement on export controls for conventional weapons and sensitive dual-use goods).
Westminster has passed legislation (under the European Union (Withdrawal) Act 2018 and the Export Control Act 2002, see here and here) to ensure that the current EU export controls on goods and services will be implemented in the UK after exit day.
Many of the products subject to export controls in current UK law are listed as a result of international agreements rather than as a result of the UK’s EU Membership. As such, the lists of controlled items are unlikely to change significantly due to Brexit. Importantly, although the goods classification system itself is unlikely to change dramatically after Brexit, the UK becoming a ‘third country’ to the EU means a significant procedural shift in terms of how exports to and via the EU will be dealt with from an export licensing perspective.
How will this affect your business?
If you currently export goods or services to the EU or via the EU, you should check whether you will be affected by Brexit. Whether your exports are affected largely depends on:
• how your exports are classified (i.e. whether they are ‘sensitive’ items subject to export controls);
• where they are being exported to (i.e. to or via the EU); and
• which authority has issued any applicable licences (i.e. if licensed, is it a UK export licence?).
Where is your export going?
If your goods or services are currently caught by dual-use controls but do not require a licence as they are being exported to the EU, you will need to apply for a UK export licence to continue these exports after Brexit. This is because trade in dual-use items within the EU (for most categories of dual-use items) does not currently require a licence. Once the UK ceases to be an EU Member State, any such export to the EU will require a dual-use licence, in the same way that dual-use exports to other third countries require licences at present.
If you already have a licence to export dual-use items to a non-EU country issued by the UK, the Department of International Trade has confirmed that these will remain valid for export from the UK. This includes registrations for Open General Export Licences and General Export Authorisations, which will still operate as UK licences.
Which authority has issued your licence?
At present, all EU Member States have the power to issue export licences, and these licences are valid in relation to exports from other EU Member States. For example, at present, a UK company may obtain a UK export licence for goods being exported from Spain to a destination out with the EU. Post-Brexit, to conduct the same transaction, the UK company will require a UK licence to export the goods from the UK to Spain and likely also an EU licence to export the goods from Spain (this may require the establishment of an office or corporate entity within the EU).
If your licence is issued by an EU Member State (other than the UK) for export from the UK, you will need to apply for a UK export licence to be used after Brexit as EU-issued licences will no longer be applicable to exports from the UK.
What’s happening to your general export licences?
UK-based exporters who currently export dual-use items to the EU and the Channel Islands will need to register for an Open General Export Licence (OGEL) to continue exporting. The license, available from the Department for International Trade’s website, is not required until the UK leaves the EU, but registration is currently open through SPIRE, the Export Control Joint Unit’s electronic licensing system.
To facilitate the export of dual-use goods from EU Member States to the UK, the EU has stated that, in the event of a no-deal exit the UK will be added to the list of countries with General Export Authorisation (GEA). GEAs permit the export of certain specified dual-use items to certain third countries from the EU, and currently apply to exports heading from the EU to Australia, Canada, Japan, Liechtenstein, New Zealand, Norway, Switzerland and the United States. The inclusion of the UK on this list is intended to minimise additional licensing burdens for EU exporters to the UK.
It is also worth noting that, to export to the UK from the EU under the GEAs, an exporter must be established in an EU Member State. An entity is established in the EU if it has its registered office, central headquarters or a permanent business establishment in the Union. Permanent business establishment is defined as a fixed place of business, where both the necessary human and technical resources are permanently present and through which a person’s customs-related operations are wholly or partly carried out. To export items under the GEA from the EU to a third country listed in the GEA, UK companies will need to fulfil the establishment requirements under the GEAs, and set up an establishment in an EU Member State.