The legal regulation of dual-use items and technologies was implemented in the Hungarian legislative system complexly. Extensive community (European Union) and domestic (Hungarian) rules exist, whereas we have summarized the crucial cornerstones in 10 points. Non-compliance with registration and licensing rules can have significant adverse consequences, as it may even constitute a criminal offense [see: Part X.].
I. What items, products and technologies are considered dual-use?
Dual-use items and technologies may be used for civil or military purposes. The precise definition is provided by Regulation 2021/821/EU, which is directly applicable in Hungary. This regulation serves as the primary law source for dual-use items, technologies and software. According to 2021/821/EU, items that may be used for design, development, production or application of nuclear, chemical, or biological weapons and their delivery systems, in addition to their civilian applications, fall under this category. This also includes items that can be used for non-explosive purposes and for contributing in any form to the production of nuclear weapons or other nuclear explosive devices.
II. Dual-use items subject to authorization / license
The list of dual-use items subject to authorization / license is provided by Regulation (EU) 2021/821, which is an essential legal framework in this field. Accordingly, based on its Annex I, the regulation presents an extensive list specifying which products require prior authorization procedures. Given that Hungary is a member of all non-proliferation treaties that regulate the trade of dual-use products, the subjects of approval can be categorized in following areas: nuclear materials, facilities and equipment, special materials and related equipment, material processing, electronics, computers, telecommunications and information security, sensors and lasers, navigation and aviation electronics, maritime, airspace and propulsion systems.
In addition to the EU Regulation, their domestic distribution is also regulated by several domestic decrees, which must be interpreted in compliance with community rules.
III. Distribution
The detailed legal prescriptions for the distribution of dual-use items are primarily regulated within national jurisdiction according to the Regulation 2021/821/EU mentioned above. In Hungary, Government Decree 13/2011 comprehensively regulates the authorization of foreign trade involving dual-use items.
By its Decree 365/2016, the Government designates the Government Office of the Capital City of Budapest („GOCCB”) as the state administrative authority for foreign trade, as well as for certain industrial and commercial matters, in addition to territorial metrology and technical safety. The Export Control Division of GOCCB handles matters related to export, transfer and transit permits of dual-use items. It oversees the importation of these products from non-European Union third countries to Hungary and issues the so-called International Import Certificate (IIC). It conducts consultations related to international obligations, carries out tasks arising from domestic implementation of international agreements and handles matters related to the export permits of non-dual-use products under international trade sanctions.
For nuclear products and nuclear dual-use items, a separate regulation applies, outlined in Government Decree 144/2011.
IV. Registration
The initial and essential step for a person, whether natural or legal, intending to distribute such products in Hungary, is their registration. This process is carried out by the abovementioned GOCCB’s administrative branch. The content of the application is basically the registration of exporter at the registry of companies engaged in foreign trade of dual-use products (the complete list is available on the GOCCB’s website, as the registered companies must be disclosed by the authority). Several attachments need to be filed, and these are specifically determined by the exhaustive list outlined in Government Decree 13/2011.
V. Export License
After the registration has been completed based on domestic law, we must again apply the EU legal norm, in conjunction with the government decree. Three main types of export licenses are distinguished: EU general export license, individual export license, global export license. Nevertheless, the picture is further nuanced by the fact that for large projects, additional annexes need to be attached.
VI. Import
The import of dual-use items into Hungary may also require authorization (national import certificate).
VII. Transfer and Transit
The transfer or intra-EU shipment within the territory of the European Union can also be subject to authorization, making it important to examine the detailed provisions of the regulations in this regard as well.
VIII. Technical Assistance
Technical assistance includes all activities related to dual-use items or technology, such as improvement, development, manufacturing, assembly, testing, maintenance, and all other technical services. This may include education, training, transfer of work experience or skills, or the provision of advisory services, including support through electronic means, as well as assistance provided over the phone or in other verbal forms.
IX. Embargo
Until 2022, the concept of an embargo was largely theoretical in the context of this field, considering the European Union and its neighbouring countries, along with other European nations. However, due to the Russian-Ukrainian conflict, the notion of an embargo has become a real and tangible aspect. If the territory subject to an embargo is either the source or the destination country, special attention must be given to the applicable EU regulations (community sanctions). An illustrative example of this is the Council Regulation (EU) 2022/328, which modifies Regulation 833/2014/EU concerning restrictive measures in response to actions undermining or threatening the territorial integrity, sovereignty, and independence of Ukraine. This Regulation significantly tightens and sometimes even prohibits export or import (even) related to Russia.
X. Misuse of Dual-Use Items
This title also corresponds to Section 330 of Act C of 2012 on the Hungarian Criminal Code. According to this provision, anyone who, without authorization or by exceeding the scope of the authorization, places dual-use items in foreign trade circulation, including their transfer within the customs territory of the European Union, or uses dual-use items contrary to the authorization, is subject to imprisonment ranging from one to five years for the offense.
Hence, those who fail to comply with the authorization rules for these products may face severe consequences. As you may ascertain it from the above, the legislator has classified the violation as a criminally punishable act, potentially leading to imprisonment. As a result, special caution is required when engaging in the export and import of such products.
If you have further questions related to this topic or if the distribution of these products and technologies holds relevance for you or your company, please feel free to contact our office for assistance.
Written by: dr. Balázs Attila Ács LL.M, attorney-at-law (balazs.acs@nzp.de)