EU export control regulation: how this affects China

On May 10th  2021, the European Union upgraded its legislation on export controls applicable to dual-use goods and technologies. This regulation will be effective from September 9 onwards. Dual-use goods are goods, technologies and software that can be used for both civilian and military applications. The reform of the dual-use regulations came as a direct response to the rising threat of EU exports being misused. China was a major country of concern behind the new legislation.

The original regulation on export control, the 2009 Regulation (EC) No 428/2009, was adopted to govern the EU’s export control regime. In essence, the EU controls the exports, transit and brokering of dual-use items to contribute to international peace and security and to prevent the proliferation of Weapons of Mass Destruction (WMD).

Even though common export control rules and assessment criteria were adopted, not all Member States consider export control to be equally important. Since there is no uniform screening standard in place or penalties for countries that do not abide the export control regulation, there can often be large differences in screening standards between countries.

This is something companies can take advantage of. If the same type of technology can be obtained from two separate countries, or even from the same company located in two countries, foreign companies will prefer the country with the least strict screening standards in place. In this way, they can increase the chance that the license for their intended import will be granted.

The upgraded EU regulation puts more emphasis on human rights than its predecessor. After the European Parliament adopted the upgraded EU regulation and sent it to the Council, Parliament member Markéta Gregorová (Greens/EFA, CZ) said:

“With the reform of the dual-use regulation, the Parliament has put human rights and human security at the forefront of European export policy. The new rules for cyber-surveillance exports paired with companies’ new due diligence requirements and meaningful transparency will make sure that our facial recognition technology and other European high-end surveillance technologies do not end up in the hands of the Chinese Communist Party or other authoritarian regimes to violate human rights.”

This statement marks the first time the European Parliament, or any other European legislative branch, has openly stated that they consider China as a substantial threat to human rights, when it comes to the use of dual-use goods. This statement can be seen as a clear indication that the new regulation was updated with China in mind.

The updated regulation strengthens controls on a wider range of emerging dual-use technologies, such as cyber-surveillance exports. Since China is a large importer of cyber-surveillance technologies, the new regulation will make it more difficult for Chinese companies to obtain these sought-after technologies. In addition, the new regulation also introduces due diligence obligations for producers, giving them a more active role in addressing the risks to international security posed by the goods they intend to export.

Since both the European Parliament and the European Council adopted the new regulation, both legislative branches need to sign the regulation to publish it in the EU Official Journal. Today, September 9, the regulation will officially enter into force.

The updated regulation is intended to make it more difficult for foreign companies to obtain sensitive goods and technologies. By including cyber-surveillance technologies to the EU Control List, one of China’s most sought-after technologies from Europe, the EU hopes to better control its exports to China. Additionally, the regulation strengthens the coordination between Member States and the European Commission in support of the effective enforcement of export controls throughout the European Union. By forcing all Member States to perform adequate export controls, the EU hopes to devaluate the favouritism China shows to some countries and to create a more equal level playing field in the EU.

The effectiveness of the updated EU export control regulation still remains to be seen and it is doubtful that all Member States will implement the regulation with the same amount of enthusiasm. However, the new regulation is only one of many ways in which the EU is toughening up its stance on China and it is likely that other new regulations in other areas are soon to follow.

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We look forward to informing you about other interesting topics in the next Datenna Industry Blog!