Strategic goods: practical issues

1. What are strategic goods?

In practice, two categories kinds of strategic goods can be distinguished: military goods and dual-use items. Military goods are specifically designed or modified for military use. Dual-use items are products, software, or technology that can be used for both civilian and military purposes. In addition, sanctions may result in non-strategic goods also becoming subject to export control.

This distinction is important because the legal assessment differs for each category. A product may qualify as a dual-use item on the basis of its technical characteristics. Another product may qualify as a military good because of its design or intended purpose.

2. Why do problems arise in practice?

Strategic goods frequently give rise to confusion in practice. A company may not regard its product as a military good because it is sold to industrial customers and used in regular production processes. Nonetheless, the authorities may examine the technical characteristics of that same product and conclude that it is also suitable for a military application.

The difference between a freely tradable product and a strategic good therefore often lies in technical details. Examples include measuring equipment, sensors, pumps, software, materials, or machine components. Depending on their specifications, performance, and end use, these products may become relevant from an export control perspective.

A seemingly minor difference can be decisive. Accuracy, temperature resistance, speed, range, power, material type, or software functionality may result in a product being classified as a dual-use item. For that reason, a general commercial description is often insufficient. Terms such as “sensor”, “machine component”, or “software module” provide too little information to assess export control status.

3. Practical example: technical details make the difference

A Dutch company supplies measuring equipment for use in the chemical industry. According to the commercial invoice and productsheet, it is a civilian product intended for quality control purposes. During an export inspection, the question arises whether the equipment is also suitable for use in nuclear facilities. Customs requests additional technical information and places the shipment on hold. The company must then demonstrate precisely what the product is capable of and how it is used.

This requires more than an invoice and a general product description. Technical data sheets are needed, together with information regarding end use, potentially correspondence with the manufacturer, and a substantiated assessment based on the relevant legislation. If these documents are unavailable, it becomes difficult to demonstrate afterwards that due diligence was exercised. Had the company determined in advance that the product might qualify as a dual-use item, it could have applied for an export authorisation. In that case, no delay would have occurred.

4. Technology, logistics, and compliance come together

Strategic goods are therefore not merely a legal matter. Technical expertise is required to understand the product, and legal expertise is required to apply the relevant legislation. Where this knowledge is fragmented within an organisation, mistakes can easily occur.

The product manager understands the technical characteristics. Sales understands the customer and the end use of the product. Logistics knows which documents are required for export. Compliance is familiar with the internal procedures. For an effective compliance process, it is important that this knowledge is brought together before a shipment is released.

5. Possible consequences for organisations

The consequences of an incorrect assessment can be significant. A shipment may be delayed, a customer may withdraw, a bank may raise additional questions, and authorities may conduct further investigations into previous transactions. In the case of serious violations, fines or criminal penalties may also be imposed.

It is therefore important for organisations to assess at an early stage whether export control requirements apply. Consideration should be given to these obligations during product development, sales activities, customer onboarding, and contract formation. Only then can it be determined in time whether additional internal controls or export authorisations are required.

A sound approach begins with a clear understanding of a company’s own products and technology. Companies engaged in the international trade of high-technology goods are well advised to document their commodity codes and other relevant findings and to review them periodically. Customs Knowledge can assist in assessing strategic goods and translating regulatory requirements into practical business processes.

While every care has been taken in the preparation of this publication, Customs Knowledge accepts no liability for any errors or omissions, nor for their consequences. This article is not intended as specific advice. Please also refer to the General Terms and Conditions of Customs Knowledge BV.