The First Annual Report on Dual-Use Export Controls
By Kwinten Dewaele, Research Affiliate at KU Leuven (Institute for Contract Law)
Introduction
Article 26 of Regulation (EU) 2021/821 (“the Regulation”) obliges the European Commission to publish an annual report on the implementation of the Regulation and the activities of the Dual-Use Coordination Group (DUCG). Similar obligations related to FDI screening exist (see Article 5 Regulation (EU) 2019/452). While the Commission already presented its fourth report on FDI screening in October last year (see for a commentary on this blog here), January 2025 marks the first time the Commission has published a report on implementing dual-use export controls. The report mainly deals with the data available from 2022.
As is the case with the reports on FDI screening, the dual-use report is accompanied by a Staff Working Document. It is composed of three chapters: (1) on the evolution of the policy and regulatory framework, (2) on the activities of the DUCG, and (3) on the numbers behind EU export controls on dual-use items.
Key Takeaways
Before delving slightly deeper into the report’s details, a few key takeaways become apparent. First, trade in dual-use items is growing. Although the report uses a new methodology—making comparisons with previously published data difficult—there is a clear increase in both authorized dual-use trade and denials. Whereas in 2021, the trade in dual-use items was valued at 38.5 billion euros, that increased in 2022 to 57.3 billion euros. Dual-use exports nevertheless only account for 2% of the Union’s extra-EU exports.
Second, three types of exports account for 50% of authorized trade (apart from global authorizations). They concern the export of nuclear material, facilities, plants, and equipment (0EC1; 21%), information security and crypto-analysis items and equipment (5EC2; 20%), and machines, tools, systems, and components for industrial equipment (2EC1; 9%).
Third, the initial fuzz around cybersurveillance controls may be overstated. From its inception, the Regulation faced much criticism concerning its treatment of cybersurveillance items. Especially the catch-all clause for cybersurveillance items ruffled many feathers from industry and NGOs. Moreover, the Commission only published guidelines on interpreting “cybersurveillance items” in October last year. Nevertheless, when we look at the actual numbers, the conclusion must be that the export of cybersurveillance items only accounts for a few cases. Indeed, all Member States combined received 288 applications for those items. While this is an increase in applications compared to 2021, cybersurveillance exports only account for 0,2% of applications (on a total of 138.764).
Overall, these numbers illustrate the increasing relevance of export controls on dual-use items. Note, however, that the report only reflects the implementation of the Regulation. The report does not clearly show the impact of geopolitical evolutions (e.g., the impact of sanctions in response to Russia’s invasion of Ukraine).
Chapter-by-chapter discussion
1. Evolution of the policy and regulatory framework
The first chapter outlines the most relevant evolutions in export control policy and regulation. By its very nature, the report does not contain much new information; practitioners who have kept track by themselves will probably not find much of use, although the overview might come in handy. In particular, the chapter emphasizes the cooperation with third countries in the wake of the 2022 EU-US Trade and Technology Council (TTC). The report goes out of its way to emphasize the shared interests and common goals between EU and US export controls, especially in light of the war in Ukraine. It should come as no surprise that the TTC sees export controls as part of a broader US-EU security strategy and promotes cooperation on enforcement and emerging technologies. It remains to be seen to what extent US foreign and security policy have shifted in light of the incumbent administration’s priorities and whether this will impact the work of the TTC. Given the risks of diverting exports and export control evasion, cooperation remains in all parties’ best interests.
Additionally, the first chapter highlights the Commission’s work in providing an overview of national implementation (and enforcement) measures. In particular, the relevance of the 2022 Information Note summarizing all national implementation measures is emphasized.
2. Activities of the DUCG
The second chapter of the report provides a detailed overview of the activities of the DUCG. Consequently, it amounts to a long enumeration of meetings, consultations, surveys, and outreach activities from the DUCG. One point of particular interest is the development of the Dual-Use e-System (DUeS) as a platform facilitating cooperation between controlling authorities and the Dual-Use eLicensing scheme, which should reduce the administrative burden on both controlling authorities and those applying for a license. The system remains currently limited to only a few countries, but interest in joining among Member States is increasing.
When fully operational and after some teething problems are resolved, these systems could facilitate a more uniform application among member states. Of course, this remains a “chicken-or-egg” debate. The system could facilitate a more uniform application of the Regulation, but perhaps only after consensus on a more uniform application is reached. It remains to be seen how the position of the Member States will evolve in the future. The TIM Dual-Use platform is not in the report but is worth looking into. It continues to be updated and could aid in identifying possible controlled technologies. Especially in fields that are at the cutting edge of technology, TIM has proven its use.
The second chapter of the report also contains some information on the most recent developments related to the Regulation, such as the 2023 and 2024 updates. Again, practitioners have kept themselves up-to-date on these issues.
3. EU export controls data
Finally, the third chapter presents the numbers on EU export controls in an aggregated form, with more detailed information in the Working Staff document. Glancing over the data leads to a few observations. While EU General Export Authorizations account for the vast majority of authorizations (93.311), the economic value of the underlying transactions remains limited in comparison to the value of transactions authorized through a global or individual export authorization (9.6 billion euros in comparison to 27.3 and 17.1 billion euros, respectively). On the other hand, export denials remain rare in absolute numbers (814) and limited in economic value (0.98 billion euros, accounting for 0.04% of total dual-use trade value).
Concerning the countries to which exports were sent, there are no great surprises. The United States remains the top destination, making use of preferential general export authorizations. With trade values estimated at 6.6 billion euros, dual-use trade to the United States via general export authorizations vastly overshadows similar exports to the United Kingdom, which occupy a second place with 2.2 billion worth in transactions. Conversely, China remains the most important destination for both individually authorized trade and trade based on global export authorization. As stated above, applications for cybersurveillance items remain limited, with only 288 applications.
Conclusions
As this is only the first report, comparisons are impossible. While the current report contains nothing particularly spectacular, it is a valuable tool for analyzing trends and raising questions on certain policy priorities. Hopefully, the information the report provides is not just left to gather dust in an office but used to critically assess what is working and what is not.
