The security policy situation in Europe has changed significantly since 2022. This has also significantly increased the importance of export control law for Austrian industrial companies. Goods, software and technologies that can be used for both civilian and military purposes or are used in military systems are particularly affected, as Wolf-Georg Schärf and Eva Maria Abpurg explain in their guest commentary.
Whether a specific product requires a license does not depend on the industry or the client, but rather on the export control classification of the goods, software and technology. This classification determines whether and according to which legal regime licenses are required, in particular according to the EU Common List of Military Equipment or the Austrian War Material Act, the EU Dual-Use Regulation or the Austrian Foreign Trade and Payments Act (AußWG 2011).
Practical case
An Austrian company develops electronics for civil aviation systems. An Italian defense contractor commissions the company to integrate an existing acceleration sensor into a military combat management system (CMS).
- Option 1: The existing product only meets the basic military requirements and must essentially be redeveloped.
- Variant 2: The existing product can be adapted by A so that it corresponds to the program available in the CMS for certain movement analyses, whereby it is not technically changed.
What regulatory requirements must A observe in the course of fulfilling its delivery obligation? The starting point is the correct classification.
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Practical case variant 1: New development for military purposes (defense goods)
If the acceleration sensor has to be newly developed or technically adapted so that it meets the specific military requirements of a CMS, it is a defense product. The decisive factor is that the sensor no longer corresponds to a general civilian standard, but is specifically designed or modified for military purposes. The decisive factor is therefore the military specification and purpose of the sensor itself, not per se its installation in a military or civilian system.
Such goods are included in the Common Military List of the European Union, regularly under list item ML11 (electronic military equipment) or, if integrated into fire control or command and control systems, also as ML5.
Even the development of a defense article is a process relevant to the defense industry. The transfer of technology, i.e. the knowledge required for development, production, integration, testing, operation or maintenance, is therefore also included as a military good in item ML22 of the EU Common List of Military Equipment.
“Even the development of a defence product is a process relevant to the arms industry.
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Approval is therefore not only required for the subsequent delivery (transfer) of the sensor, but also for the exchange of development data, design drawings or technical specifications. The approval requirement applies regardless of whether the technology transfer is carried out in writing, verbally or electronically by email.
Practical case Variant 2: Adaptation of an existing product (dual-use goods)
If the accelerometer remains unchanged and continues to comply with a civilian standard, it is still a dual-use item according to Annex I of the EU Dual-Use Regulation (EU) No. 2021/821, typically under item 7A (for example 7A001.a as a linear accelerometer). The fact that the sensor is to be integrated into a military CMS does not change its classification as dual-use goods, as the design status already determined before the order was accepted does not change. In this variant, the sensor is neither designed for military use nor technically adapted; it therefore retains its civilian or dual-use character. Therefore, it is not the overall system that is relevant, but only the sensor as an independent product.
The decisive factor is therefore the objective-technical classification of the sensor and the transferred know-how. In principle, there is no authorization requirement for their intra-Community transfer, unless they are listed in Annex IV of the EU Dual-Use Regulation.
Technology is also controlled in the dual-use area (in our example, a listing under 7E001 can be assumed). This means that intra-Community exchange does not require a separate license, but the export-controlled nature of the technology must be documented on the media used (example: “Export Control Statement – This document contains technology classified as 7E001 Annex I in accordance with EU Dual-Use Regulation No. 2021/821”).
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Intra-Community transfer
Variant 1 (defense goods): The transfer of defense goods within the EU is subject to authorization in accordance with Section 26 Foreign Trade and Payments Act 2011. General licenses can be used for certain recipients, in particular government agencies, which require prior registration with the responsible federal ministry.
Variant 2 (dual-use goods): In contrast, the intra-Community transfer of dual-use goods is generally not subject to authorization, with the exception of goods listed in Annex IV of the EU Dual-Use Regulation.
The competent authority in both variants is the Federal Ministry for Economic Affairs, Energy and Tourism (Section II, EU and International Market Strategy, Division II/2 – Export Control), and applications should primarily be submitted via the electronic export portal.
Intangible technology transfer
The exchange of technology, for example through the transfer of design drawings, technical specifications or via email, cloud access or video conferencing, is considered an export or transfer under export control law. Companies must ensure that access to project data is restricted to authorized persons within the company. Technical assistance (technical support) to the Italian partner may only be provided within the scope of existing licenses.
Documentation obligations
According to § 65 AußWG 2011, documents relevant to export control must be kept for at least five years. The respective goods list item (e.g. ML11, ML22 or 7A001) must be stated in business-relevant documents such as offers, contracts and delivery bills.
“The distinction between defense goods and dual-use goods can cause difficulties in practice. The decisive factor for the assessment under export control law is not the overall system, but the technical design and intended purpose of the individual product.”
Conclusion
The distinction between defense goods and dual-use goods can cause difficulties in practice. The decisive factor for the assessment under export control law is not the overall system, but the technical design and intended purpose of the individual product. If a sensor is specified for military use, the rules for defense goods already apply in the development phase. If, on the other hand, the sensor remains technically civilian, it is a dual-use item, even if it is used in a military system. A precise classification at the start of the project is therefore essential in order to apply the appropriate licensing regime.
