Comparison between US export controls and EU export controls

The United States and the European Union are the world’s two largest trading partners. In 2021, 15.5% of total U.S. exports (by dollar value) went to EU member states, while 17.3% of total U.S. imports came from the EU, according to the U.S. Office of Technology Assessment.

With so much goods flowing back and forth, it’s perhaps surprising that there isn’t a comprehensive bilateral trade agreement between the two countries.

source: Worldtopexports.com

Both the US and EU export control systems follow four multilateral export control mechanisms that establish common control lists and practices for governments around the world. They are:

Different and sometimes surprising combinations of governments work together to develop these common rules because it makes their national policies more effective—both for exporters who follow the rules and for the government agencies that enforce them.

As a result, the EU rules (now known as Regulation 2021/821) have much in common with the U.S. Export Administration Regulations (EAR).

• Both regulations cover dual-use items – meaning they apply to items that can be used for both civilian and military purposes.
• Both include control lists organized by category and individual control entries that generally correspond in both lists. For example, the highest US Export Control Classification Number (ECCN) by volume for shipments to the EU is 5A002 for Information Security Goods. The EU list contains an equivalent entry under the same 5A002 designation.
• Both set out basic requirements that require a licence (or export authorisation in EU parlance).
• Both countries have similar measures in place for the movement of goods within their borders. In the United States, shipping goods across state lines is not considered an export, and goods can also move freely between EU member states with a few exceptions.
• Both regimes identify circumstances where export license requirements may be waived. Part 740 of the EAR lists 18 license exceptions. The EU has eight general export authorizations (EUGEAs) that allow exports to specified destinations without a license under certain conditions.

Huge Differences

Not surprisingly, there are also significant differences between them.

ITAR Not Included: The EU does not have any regulations comparable to the US International Traffic in Arms Regulations (ITAR), which regulates the export of defence articles and defence services, or to the European Arms Trade Regulations’ 600 series military goods controls. This is because EU rules are limited to areas of “common competence” agreed by member states – in the case of export controls, this means dual-use items, not military goods. While the EU’s Common Position 2008/944/CFSP outlines how member states should control military technology and equipment, decision-making and executive authority remains with each member state.

No central executive power: While the EU sets dual-use export control regulations for its member states, it does not have a bureaucracy like the U.S. Bureau of Industry and Security to manage the export authorization process. The EU itself does not issue export licenses. That job is left to the governments of each member state, such as the German Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle). The EU also does not enforce its own rules. Again, this aspect of implementation is the responsibility of national authorities.

extraterritorial: U.S. regulations generally apply to items exported from the United States and, in many cases, to items that never enter U.S. territory. For example, foreign-made products or software that contain U.S. components or are produced using U.S. technology or software may be subject to U.S. export license requirements (see related article: Subject to the EAR – What it means and how to deal with it). Through the concepts of re-export and in-country transfer throughout the EAR, the United States asserts jurisdiction over the movement outside the United States of many items that have some connection to the United States.

Countries do not like other countries trying to regulate behavior within their own borders through legislation. The European Union and its member states generally do not formally accept the extraterritorial effect of US export controls, but in practice they tend to comply.

In contrast, EU regulations rarely apply to re-exports and transfers outside the Union.

Brokerage: If an EU person or entity negotiates a transaction involving dual-use items with a non-EU country, the transaction may be subject to the EU Brokering Services Regulation. This regime applies when dual-use items may be used for weapons of mass destruction or other military end uses. In the United States, brokering regulations only apply to items subject to the International Traffic in Arms Regulations, under which brokering services are treated differently.

Philosophical differences in control lists: The EU dual-use export control list in Annex I to Regulation 2021/821 is based almost entirely on four multilateral control regimes, but national authorities may impose controls on other items. Its US counterpart, the Commerce Control List (CCL), is packed with items not covered by multilateral associations. Many of the items unilaterally controlled by the US BIS are at a lower level of control – such as ECCN 9A991 for many civilian aircraft parts – but others are strictly controlled. For example, the EU list does not have anything equivalent to the CCL’s 600 series (military items that were once subject to the ITAR and have been moved to the EAR) (see related article: Exporting 600 series items under license exceptions). These would typically be handled under the military export controls of individual member states.

In simple terms, the EU Dual Use List is a subset of the US CCL. If an item is on the EU list, then it is probably also on the US list. But if it is not on the EU list, there is still a chance you can find it on the CCL.

EAR99 and NLR: In the EU, if an item is included in Annex I, an export authorization is required. If the item is not on the list, it is generally not controlled. (EU regulations do provide that even unlisted items require a license if they are intended for use in weapons of mass destruction programs or human rights violations—often referred to as “catch-all” controls.)

The US system is not so clear-cut: just because something is not on the CCL does not mean it is unregulated. It may still be classified as EAR99 and may require a license depending on where it is shipped, to whom it is shipped, or for what purpose it is shipped. And items on the CCL may be authorized for export as NLR – no license required or even requiring a license exception – based on the same factors.

Is change coming?

Overall, exporters who have experience in both systems tell me that they find the EU system easier to navigate. The two systems are broadly consistent, with the most troubling differences being that the EU system permits activities that the US does not, such as extraterritorial issues of re-exports and transfers.

But Russia is a player in multilateral institutions, and its growing bellicosity toward Western democracies has prompted the United States, the European Union, and other governments to consider the limits of these decades-old post-Cold War institutions. Discussions are underway on both sides of the Atlantic about whether a new “multilateral” export control group should be established. Indeed, a new era may have arrived as like-minded governments coordinate closely to begin imposing sanctions on Russia in 2022.

Do you have questions about the differences between U.S. export controls and European export controls? Visit www.learnexportcompliance.com to learn about our company, our faculty, our staff, and our highly regarded Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars, and live webinars in the U.S., Europe, and elsewhere, and to browse our catalog of more than 80 on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute (540-433-3977) for more information.

Scott Gearity is President of ECTI, Inc.