New export controls: How the amendment to the Foreign Trade Act will impact Austrian companies
The Foreign Trade Act (Außenwirtschaftsgesetz) is set to be amended. In addition to a new name – the act will now be called Security Export Act (Sicherheitsexportgesetz) – there are plans to reduce bureaucracy and shorten export procedures. But is this really the case? We analyse the proposed simplifications and new burdens for the export of defence-related products, firearms, and dual-use goods, and whether the amendment will reduce bureaucracy.
The 6 most important benefits for exporters...
1. Expanding electronic applications: Currently, only those who have appointed a responsible representative can submit an online application. This obligation is to be abolished in future. The aim is to open up online applications to all applicants. However, approval notices will presumably still only be issued physically and not electronically.
2. Conversion of preliminary inquiries: If an applicant has not yet concluded a contract for a relevant foreign transaction, they submit a preliminary inquiry to check whether the planned export is actually eligible for approval. In future, it should be possible to transfer the preliminary enquiry procedure to a regular licensing procedure. The Minister of Economic Affairs wants to speed up export procedures in this way. However, this change is only likely to apply to a few special cases.
3. Simplifications for general export authorisations: In contrast to individual export authorisations, general authorisations allow the export of certain less sensitive goods to some countries without a case-by-case examination. The draft provides for minor simplifications in this regard. In future, it should no longer be necessary to state the address of the responsible representative when registering for a general export authorisation. Additionally, companies that no longer make use of their general authorisations should be able to have themselves deleted from the register of general export authorisations so that they are no longer subject to periodic reporting obligations in this regard.
4. Lifting of arms embargoes: The arms embargoes for Armenia, Azerbaijan, the Democratic Republic of Congo, Somalia and the Central African Republic are to be lifted as the prerequisites for them under EU and international law have ceased to exist. This enables the export of defence-related products to these countries.
5. Suspension instead of revocation: If an export has been approved but one of the conditions for approval subsequently ceases to apply, the authority must revoke the approval notice. This is the case, for example, if a civil war breaks out in the country of destination after the export licence has been issued. It is planned that the authority can temporarily suspend the licence instead of revoking it. The advantage of this is that the entire export procedure does not have to be repeated if the reason for the impediment no longer applies. The prerequisite for the suspension is that the reason for the impediment is expected to cease to apply within six months at the latest.
6. Mere administrative penalties for breach of reporting obligations: Reporting obligations are often imposed on exporters in the export permit. Currently, the violation of such reporting obligations is punishable under judicial criminal law because reporting obligations are formulated as conditions in the export authorisation. According to the ministerial draft, reporting obligations should no longer be formulated as conditions. Their violation is to constitute a mere administrative offence. It should be noted that, due to the principle of cumulation in administrative criminal law, each reporting violation could then be punished with a fine of up to EUR 40,000.
... and the 4 biggest burdens for exporters
1. New notification obligations: In the future, companies will have to inform the purchaser of dual-use goods in writing that these goods are subject to an export authorisation when begin exported from the EU. Although the Dual-Use Regulation 2021/821 already provides for such a notification obligation, stricter rules are to apply in Austria. Firstly, the notification obligation should also apply to a sale to a company based in Austria and secondly, to dual-use goods that are not listed in Annex I of the Dual-Use Regulation. This creates uncertainty for companies because classification as dual-use goods is often complex. A similar notification obligation is planned for the sale and transfer of defence-related products to third-country nationals who are only staying in Austria temporarily.
2. Longer deadlines for authorities: Generally, no export licence is required for the export of non-listed dual-use goods. However, if the authority has knowledge or indications that these goods could serve a military purpose in the broadest sense, it must make this process subject to a licence requirement in individual cases. This also applies to goods for digital surveillance that could be intended for use in connection with internal repression or serious human rights violations. Currently, the authority must inform the exporter within three working days whether an export authorisation is required. In future, this deadline is to be extended to two months. Significantly longer decision deadlines than before are also to apply if the authority prescribes a reporting obligation by ordinance. This raises the question of whether this can be reconciled with the aim of speeding up procedures.
3. Duty to return old permits: Export licences and import certificates may only be issued for a limited period. The ministerial draft wants to introduce a statutory obligation to return expired permits and import certificates to the authority. This should ensure that no one can use invalid permits. The law already provides for an obligation to return revoked permits. As such a return obligation can only serve its purpose if notices continue to be issued physically, it prevents the issuance of purely digital export licences. Violation of the obligation to return notices may result in an administrative fine. However, if the obligation to return is formulated as a condition in the approval permit, a criminal law penalty is possible.
4. Longer record retention periods: Exporters are obliged to keep records. Invoices, cargo manifests, transport documents and other business documents must currently be kept for five years. The ministerial draft wants to extend the retention period to ten years.
Conclusion: No major relief for Austrian exporters
The ministerial draft envisages selective adjustments. However, it does not bring any major relief for the domestic export industry. This is problematic because domestic companies suffer under the strict export regulations.
There are no plans to merge the export control regimes for defence-related products, dual-use goods and war material under the new Security Export Act. However, a uniform export law would have significantly reduced complexity. A One Stop Shop instead of the current responsibilities of BMWET, BMI, BMLVS and BMEIA is also not planned. Both were already planned in the 2017 government programme. They are not to be implemented this time either.
The ministerial draft does not provide for an amendment to the War Material Act. This should only follow in a next step. The draft also does not contain any plans to amend Section 320 of the Criminal Code. The approval criteria of the Foreign Trade Act are also not to be amended. Admittedly, there is hardly any leeway in this respect because the criteria are largely prescribed by EU law.
With regard to the fifth omnibus package (“Defence Readiness”), which the EU is currently preparing, a further amendment to the Foreign Trade Act will soon be required. This is because the package includes an amendment to Directive 2009/43/EC on defence-related products. This will then have to be incorporated into the Foreign Trade Act.
In conclusion, the draft of the Security Export Act and the amendment to the two Foreign Trade Ordinances do not appear very ambitious. Many of the changes are purely linguistic in nature and the promised “massive reduction in bureaucracy” is currently only rudimentary. On the substance, the Security Export Act primarily makes up for the long-needed adaptation of the Foreign Trade Act to the Dual-Use Regulation 2021/821. Although the described simplifications and various textual clarifications are to be welcomed, the planned amendments will not result in the promised massive acceleration of the export procedure. Further changes could, of course, still be made in the government bill and in the parliamentary procedure.
