Revolution in Special Trade? Digitalization and New Legislation Ahead

The defence industry and companies trading in dual-use products are facing changes that may revolutionize special trade. The Council of Ministers is currently processing a draft amendment to the regulations concerning so-called special trade and licensed activities. The draft, submitted by the Minister of Development and Technology in July 2024, is now under review by the Standing Committee of the Council of Ministers. The key assumptions of the draft include, among others, the alignment of Polish regulations with EU standards and the implementation of the Tracker 2.0 system. Find out what this means for your business.

Amendments to the Act on Strategic Trade and the Concession Act to facilitate business operations

The draft amendment to the Act on “special” trade and the Concession Act, prepared by the Ministry of Development and Technology (MRiT), constitutes one of the most significant reforms of the special trade system in years. Its foundation lies in the necessity to adapt national provisions to the latest EU standards, particularly those resulting from Regulation (EU) 2021/821, as well as in the intention to enable entrepreneurs to utilize the Tracker 2.0 ICT system, supporting administrative procedures related to obtaining export licenses for the foreign trade in goods, technologies, and services of strategic importance (i.e., armaments and dual-use products).

Finally in line with EU Law

The most visible change proposed by the draft is the alignment of the Act on Foreign Trade with Regulation (EU) 2021/821. Primarily, the draft revises and standardizes the definitions used in the Act, which, with regard to dual-use products, directly reference EU provisions, and, with regard to armaments, adopt analogous wording. New definitions of national and EU general licenses have also been added.

Article 6 of the Act, in its proposed version, specifies the cases outlined in Regulation (EU) 2021/821 where an authorization is required for certain forms of trade (export, intra-EU transfer, technical assistance, brokering, transit) in relation to dual-use products, as well as the types of licenses issued.

The amendment of Article 17a of the Act also reflects the requirements of Regulation (EU) 2021/821 regarding the obligations of the supervisory authority. The provision, in its current form, still reflects repealed Regulation (EC) No. 428/2009. The draft introduces new reporting duties arising from Articles 9, 10, and 11 of Regulation (EU) 2021/821.

Changes for entrepreneurs – alignment with Regulation (EU) 2021/821

The draft amendment should be viewed positively from the perspective of entrepreneurs engaged in special trade. Among the changes that the defence and dual-use sectors may welcome is, for instance, the reduction of the mandatory waiting period between the submission of a declaration of use of a national general license and the commencement of trade. Currently, the Act requires at least one month; the draft proposes to reduce this to 14 days. This may expedite transactions and allow entrepreneurs greater flexibility in responding to sudden demand for dual-use products from foreign clients.

Another significant change concerns legal certainty in the use of general licenses for arms trade. The draft introduces the obligation to attach a copy of the Internal Compliance Program (ICP) certificate, enabling the authority to verify whether a given entrepreneur indeed has such a system in place.

Pursuant to the new Article 27a, the obligation to submit annual reports to the Ministry of Internal Affairs on arms trade will be extended to include intra-EU transfers, whereas until now it applied only to exports.

The draft also provides for the maintenance, by the competent minister (currently MRiT), of a register of individual and global licenses granted, as well as entities using national and EU general licenses.

The validity periods of licenses are also subject to change. For dual-use products, individual and global licenses will be valid for 2 years, while licenses for large-scale projects will be valid for 4 years. For arms trade, the validity period of an individual license will be 1 year, and a global license – 3 years.

Additionally, under the new Article 22(6a), the validity of an import certificate (issued as an administrative decision) is set at 12 months.

Digitalization in the service of special trade

The most significant change foreseen by MRiT is the digitalization of processes related to the foreign trade in goods, technologies, and services of strategic importance. The Tracker 2.0 system, developed by the Łukasiewicz Research Network – Poznań Institute of Technology, is specifically designed for this purpose.

Once enacted, entrepreneurs will be able to submit applications for individual and global licenses through an e-service, significantly accelerating and simplifying the licensing process.

Electronic submission of license applications will also entail electronic communication with the supervisory authority. Since the Tracker 2.0 system will also be used by Customs and Tax Service officers, applicants will be obliged to provide Harmonized System (HS) or Combined Nomenclature (CN) codes in their applications. This measure is intended to accelerate the global processing of arms and dual-use product trade.

Applications will be submitted electronically through the Entrepreneur Information Point, as provided for in Article 51(1) of the Act on CEIDG. The electronic form will include all necessary data, and attachments may also be uploaded. Applicants will have real-time access to the system to track the processing status of their applications, including opinions issued by relevant authorities.

The new legislation will also allow entrepreneurs to maintain trade records in Tracker 2.0. Thus, records may be kept in paper form, in another ICT system enabling registration and storage, or directly in Tracker 2.0. The system will also facilitate the reporting of transactions executed under general (national and EU) licenses.

MRiT will also use Tracker 2.0 to maintain a register of granted individual and global licenses, as well as entities utilizing general licenses.

End of paperwork? Will the amendment simplify formalities?

The draft amendment to the Act on Trade certainly represents a promising solution which, once enacted, may ease the operations of entrepreneurs involved in arms trade or dual-use products.

The proposed changes are aimed at streamlining and simplifying the licensing process, while also enabling applicants to monitor the progress of their cases at every stage through Tracker 2.0.

At this stage, however, it is not possible to assess the functionality and efficiency of the system. Certain “teething problems” cannot be excluded, yet once resolved, entrepreneurs are likely to gain a modern tool that will significantly facilitate daily operations and reduce paperwork associated with trade.

The alignment of the Act with Regulation (EU) 2021/821 must be assessed positively, as the previous version of the Act often led to confusion.