Vnitropodnikový program kontroly vývozu (ICP) při exportu zboží dvojího užití.

What are dual-use goods and when do you need an export authorization?

Even a seemingly ordinary product can be misused for military purposes or for the production of weapons of mass destruction – which is precisely why international rules for controlling their export exist. In practice, this means that if your company exports such items outside the EU, you must verify whether they are listed on the control list (currently Annex I to EU Regulation 2021/821) and whether you need to obtain an export authorization in advance from the Licensing Administration of the Ministry of Industry and Trade (MIT).

Export control of dual-use goods in the Czech Republic is governed primarily by the directly applicable EU Regulation No. 2021/821 and related Czech legislation (Act No. 594/2004 Coll. and other regulations). Every exporter is obliged to determine whether their product or technology is subject to control and, if necessary, apply for an export authorization. Authorization is usually not required for deliveries within the EU (so-called intra-Union transfer), with the exception of particularly sensitive items listed in Annex IV to the Regulation. For exports outside the EU, however, it is necessary to assess each case – even unintentional violation of the rules can have serious consequences.

An established ICP is the basis for a global export authorization as well as for the use of the Union general export authorisation EU007; we describe the entire authorization regime, including deadlines and annexes, in the article export of dual-use goods from the Czech Republic – licenses and obligations.

It is not just about items explicitly listed: the exporter has a so-called duty of care (the catch-all principle), meaning they must not export even unregulated goods if they suspect they could be misused for the production of weapons or military use (for example, if they know about their foreign customer's connection to weapons programs). This "know your customer" principle is key – the authorities expect the exporter to verify the end-user, the intended use, and other circumstances of each transaction in advance.

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FAQ – Legal tips for exporting dual-use goods

What counts as dual-use goods? It includes a wide range of items from materials and components to software and know-how that can have both civil and military uses. The exact definition and list of controlled items are contained in the annex to the EU Regulation – it has hundreds of pages of technical categories. If you need to verify a specific product, we recommend a professional consultation (contact our office: consultation@arws.cz).

When do I have to apply for an export authorization? Authorization is required for the export of items listed on the list (Annex I to the Regulation) to third countries (outside the EU). In addition, you must also apply if the authorities notify you that the goods in question may be misused, or if you yourself detect a risk of sensitive end-use (the so-called catch-all obligation). There are also Union general export authorisations for certain lower-risk destinations (e.g. USA, Japan, etc.) which simplify the administration – but even when using them, you must meet the set conditions and register with the MIT.

Are you unsure whether your exports need a license? Contact us at consultation@arws.cz and we will go through it with you.

Why implement an Internal Compliance Programme (ICP)?

Determining whether a specific product is subject to an export authorization is not easy. Classifying goods according to technical parameters and assessing the risk of a transaction requires expert knowledge – cooperation between company technicians, sales representatives, and experienced lawyers is often necessary to prepare the authorization application correctly. However, managing a specific export on a one-off basis is not enough.

If your company exports or intends to export strategic technologies more regularly, you should consider implementing an internal system to ensure ongoing compliance with all regulations – a so-called Internal Compliance Programme (ICP).

This is a set of measures, processes, and policies within your company that continuously ensure that you always meet legal requirements when exporting. A properly set up ICP covers the entire "lifecycle" of an export transaction – from the initial verification of whether the product is controlled, through verifying the end-user and obtaining licenses, to export documentation, customs clearance, and record archiving.

Although legal regulations do not directly mandate having an ICP in place, in practice it is almost a necessity for any larger exporter. Furthermore, if you want to obtain a global export authorization (a global license for repeated exports of a certain type of goods to selected countries or specific partners), the authorities will require a functional ICP as a condition.

For you as an entrepreneur, however, the main benefit of an ICP is that it minimizes the risk of errors – it systematically ensures that nothing is forgotten and detects potential problems in time (e.g. new sanctions against the country you sell to, or technical changes due to which your product newly falls under control).

Thanks to the ICP, you have your export agenda under control and can focus on business instead of stressing over studying regulations with every order. Last but not least, you send a signal to business partners and state authorities that you are a trustworthy company with a responsible approach – this can facilitate negotiations with authorities and increase the chance that any authorizations will be granted faster.

What elements does an ICP consist of? The European Commission recommends focusing on seven core compliance areas when building an ICP:

• Top-level management commitment and corporate compliance culture: company management must support and actively promote the importance of export control (e.g. formally declare a compliance policy, lead by example, and allocate resources to ensure it).

• Organizational structure and responsibilities: it is necessary to clearly define who in the company is responsible for export control – typically you appoint an Export Compliance Officer and define roles for other employees (e.g. who screens customers, who is in charge of customs formalities, etc.).

• Training and employee awareness: regularly train relevant employees so they know the regulations, can recognize controlled items, and catch "red flags" (suspicious circumstances of a transaction) in time. Even regular employees should understand why export compliance is important and how they can help prevent violations of the law.

• Transaction screening process: set up procedures for each export order – checking whether the goods fall under the list, whether the destination country or customer is under sanctions, verifying end-use (requesting an end-user statement), assessing re-export risks, etc. This also includes internal rules that no shipment can be dispatched without the necessary authorization.

• Control and audit, corrective actions: continuously monitor the functioning of the ICP, conduct internal audits of export cases, and if errors or gaps are found, immediately take corrective actions. Management should receive regular reports on the functioning of the program and any incidents.

• Record-keeping and documentation: keep complete documentation for each export (submitted applications, licenses, contracts, declarations, transport documents, classification calculations, etc.) for the period prescribed by law. In addition to fulfilling a legal obligation, this facilitates potential inspections by the state and the defense of the company if a problem arises.

• Physical and IT security: ensure that controlled items or technologies do not get into the wrong hands, even within the company. This means having secure warehouses, workshops, but also, for example, setting up controls in IT systems to protect sensitive technical data (e.g. access rights, encryption, restricting the sending of technical documentation abroad without approval).

Every company will have an ICP tailored to its needs – it will look different for a small trading company and different for a large manufacturer with its own export control department. However, it is important to cover the above areas in a reasonable proportion.

This might seem like a matter of course, but the reality is usually more complex: for example, correctly determining the classification of goods according to the list requires a detailed technical analysis, keeping knowledge up to date (the list is continuously amended), and often communication with authorities. Similarly, screening business partners is not trivial – companies must monitor international sanctions lists, verify the ownership structures of customers, watch out for unusual requests (e.g. suspiciously large orders of spare parts or unusual delivery destinations), etc.

Individual steps that look simple on paper involve a number of exceptions, technical details, and links to other regulations in practice. No wonder that implementing an effective ICP on your own is very challenging for a layman – it often means months to years of gradual fine-tuning and learning from mistakes. This is precisely where a law firm specializing in export law can fundamentally help your company.

Our lawyers at ARROWS, a Prague-based law firm, deal with dual-use exports and overall trade compliance on a daily basis and have extensive experience in implementing ICPs for clients of various sizes (we also commonly partner with in-house legal teams to resolve special matters in this area).

We can quickly set up a turnkey internal program for you – prepare the necessary guidelines, train your employees, implement transaction control procedures, and set up record-keeping so that you meet all legal requirements and protect your company from sanctions.

All this with regard to the size and nature of your business, so as not to burden you unnecessarily with formalities, but at the same time to ensure maximum security. For clients, it is also valuable that at ARROWS we combine legal and tax advice with practical business consultations – our experts understand not only the paragraphs but also your business. (Are you looking for specialists in this area? Our Czech legal team is ready to help you – write to consultation@arws.cz

.)

Is implementing an ICP mandatory for exporters? Strictly speaking, it is not (except for specific cases, such as using a global license). In practice, however, an effective compliance program is considered a standard – authorities expect it from active exporters and require it for certain authorizations. Even if the law does not explicitly command you to have an ICP, without it you expose yourself to unnecessary risk. Furthermore, by implementing an ICP, you demonstrate that you comply with the laws, which can improve your relations with regulators.

How long does it take to implement a functional ICP in a company? It depends on the size and complexity of the company. For a smaller company, a basic program can be set up within a few weeks to a couple of months; for a large enterprise, it can take longer because more people need to be trained and processes aligned across departments.

With the help of experienced professionals (such as the ARROWS team), the entire process will be significantly accelerated – you will use proven procedures and avoid dead ends. Do not hesitate to contact our office – consultation@arws.cz.

What are the risks of non-compliance with export rules? (Risks and sanctions)

You might think that you can handle the administration and that no penalties are imminent if you do not export "anything dangerous". The reality is that violations of dual-use export control rules carry very severe penalties – and ignorance is no excuse.

Czech and European authorities have significantly tightened supervision over compliance with sanctions and export regulations in recent years. Inspections can come at any time: the customs administration monitors shipments leaving the EU, the Licensing Administration of the MIT retrospectively checks how companies fulfill their obligations, and can also initiate in-depth audits. If a violation is found, administrative proceedings to impose a fine are initiated – and in serious cases, criminal prosecution follows.

For less serious offenses, high fines are threatened for both the company and the responsible persons. In the Czech Republic, a fine in administrative proceedings can reach up to tens of millions of CZK. For example, for violating international sanctions, the law provides for sanctions up to CZK 50,000,000.

In addition, authorities can revoke already issued authorizations or ban further exports, which can mean the loss of key markets for the company. In the most serious cases (e.g. intentional illegal export of sensitive equipment), it is a criminal offense.

The Czech Criminal Code defines the criminal offense of "violation of regulations on the control of export of dual-use goods" with a prison sentence of up to 8 years, a pecuniary penalty, or forfeiture of property.

The responsibility is borne by the specific director, manager, or employee who carried out the export without authorization, but the penalty can also fall on the legal entity (company) itself. The penalty can then be, in addition to a fine, for example, a ban on activity, a ban on public procurement, or up to 5% of the company's global turnover (which amounts to astronomical sums for larger corporations). In extreme cases, you can pay for a single mistake with the existence of the entire company – or your personal freedom.

Other risks are less visible but realistically threaten your business. For example, if the customs office finds discrepancies, it can detain your shipment at the border. Delivery will be delayed by weeks or months, you will fail to fulfill the contract, and your foreign customer may withdraw from the contract.

You will lose not only profit but also your reputation as a reliable supplier. Relations with business partners will suffer, especially if they learn that the problem was a violation of the law. In addition, a company that errs once against export regulations gets "into the crosshairs" of the authorities – in the future, it can expect more frequent inspections and stricter assessment of applications. Restoring a reputation takes years, while a bad reputation spreads quickly. In today's interconnected world, moreover, one cannot rely on a problem being kept secret – information about fines or charges against companies can leak to the public, which can negatively affect, for example, share value or investor confidence.

In short, underestimating export compliance does not pay off. It is useful to imagine the worst-case scenarios and realize that the costs of prevention (implementing an ICP, consulting with lawyers) are negligible compared to the potential damage. Below is an overview of the main risks and how the ARROWS law firm can help in such situations:

From the above, it is clear that the risks are significant, but they can be effectively managed if you have experienced professionals at hand. Many companies initially think they will "somehow watch over the export agenda themselves", and only the first complication teaches them that there are too many details and an amateur approach is not enough.

In legal practice, we often see cases where entrepreneurs in good faith underestimated some exception or procedural detail – for example, an incorrectly filled out authorization application extends the proceedings by months, or a company out of ignorance fails to report a change in a license and receives an unnecessary fine. Yet these errors can easily be eliminated when you have a lawyer specializing in international trade at your disposal.

ARROWS provides clients with a comprehensive service in this area: from one-off consultations, through the preparation or review of all documents (applications, contracts, internal guidelines), to long-term management of the compliance agenda in the form of external supervision. Our law firm deals with export controls and related international law issues daily – thereby we can significantly shorten the client's time and minimize the risk of errors.

In addition to expertise, we also have the necessary background: we have been building the ARROWS International network for over 10 years, so if your export has an international overlap, we can also consult on foreign legislation or secure a lawyer in the target destination. Our professional liability insurance up to CZK 500,000,000 is a matter of course, so it is safer for the client to leave the whole matter to us – in case of an error, we are insured and guarantee the correctness of the procedure.

We are also commonly able to connect our clients with each other if we see interesting synergies or business opportunities – if, for example, you are looking for an investor or business partner for your project in the field of hi-tech export, we will be happy to help in this direction as well (just write to consultation@arws.cz).

In conclusion, only one thing can be said: if you do not want to risk unnecessary errors, penalties, or business losses, entrust the export control agenda to professionals. Investing in prevention and professional advice is a fraction of what you could lose in a single sanction. The ARROWS law firm has rich experience with the legal and practical securing of exports – we will make sure that your business can expand to world markets without worries, while you leave all worries with authorities and regulations to us. Do not hesitate to contact us for a non-binding consultation at the e-mail consultation@arws.cz.