German companies are distributing their goods and services all over the world. This applies not only to large corporations, but particularly to small and medium-sized businesses. Many medium-sized companies sell their products abroad and are oftentimes world market leaders in their area of expertise. German corporations regularly establish subsidiaries and branches abroad and process payments across national borders. This increased international connectivity opens up new sales markets but also forces companies to comply with the complex legal requirements of foreign trade law.

Complex regulatory framework

These include the national regulations of the Foreign Trade and Payments Act (Außenwirtschaftsgesetz, AWG) and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, AWV) as well as European directives on country- and person-specific embargoes (e.g. against Russia/Ukraine/Crimea, Syria, terrorist organizations). In addition, the regulations of other countries must be taken into account whenever they apply to German companies, in particular the regulations of U.S. export control law. The reinstated Iran sanctions are just one example.

German export control law lays down a wide range of licensing and registration requirements in relation to the cross-border trade of goods and services. The so-called dual-use goods (items that are usable for both civilian and military purposes) are particularly important in this context. What kind of goods fall into this category defines Annex I of the EC Dual-Use Regulation and Part I of the Export List of the AWV. The competene regulatory authority is the Federal Office of Economics and Export Control (BAFA).

Furthermore, German companies must comply with extensive reporting obligations with regard to cross-border payments and capital transactions. For example, payments by a German national of more than 12,500 Euros to a foreign company or a foreign individual must be reported to the Deutsche Bundesbank if they are not related to the import, export or transfer of goods. This also applies to payments made by a foreigner to a German national. Reporting may also be required if a resident holds a direct interest of at least 10% in a foreign company. The Bundesbank has made the relevant reporting forms available on its website.

Sanction risks

These regulations create considerable sanction risks for the affected companies and their employees. Violations of these laws, even if only committed negligently, can be punished with hefty fines. In cases of negligent violations the filing of a self-disclosure pursuant to Section 22 (4) AWG may be a way out. This requires that the company itself has discovered the violations and reports them to the competent authority and implements appropriate compliance in order to avoid similar violations in the future.

Furthermore, wilful violations may lead to criminal prosecution. Since July 2017, prosecution authorities have been allowed to confiscate turnovers generated by illegal or non-compliant export transactions in an extensive manner. In some cases, this can threaten the existence of the entire company. Additionally, U.S. authorities regularly exclude affected companies from the U.S. market and publish violations by naming and shaming the company.

Our solutions

FS-PP Berlin defends both companies and individuals against allegations of criminal and administrative offences regarding foreign trade law. We work closely with law firms in Germany and the U.S. that specialize in export control law and can thereby offer tailor-made solutions for our client’s export business that ensure compliance with all relevant trade law regulations.