Global Trade and Customs Journal - Fried Frank

Global Trade and Customs Journal

Publisher Kluwer Law InternationalP.O. Box 3162400 AH Alphen aan den RijnThe Netherlands

General EditorJeffrey L. Snyder, Crowell & Moring, Washington, DC

Corporate Counsel and Book Review EditorDr Michael Koebele, Senior Attorney EMEA, Goodyear Dunlop Tires, Belgium

Interview EditorJohn B. Brew, Crowell & Moring, Washington, D.C.

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Copyright© 2013 Kluwer Law International

ISSN: 1569-755XAll rights reserved. No part of this publication may bereproduced, stored in a retrieval system, or transmitted inany form or by any means, mechanical, photocopying,recording or otherwise, without prior written permission ofthe publishers.

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Author Guide

[A] Aim of the Journal

Global Trade and Customs Journal provides readers with new ideas, fresh insights, and expert views on critical practical issues affectinginternational trade, including export controls, trade remedies, and customs compliance, with a growing focus on international investmentregulation. Written for practitioners by practitioners, the journal offers practical analysis, reliable guidance, and experienced advice to supportprofessionals in protecting their clients’ or organization’s compliance interests.

[B] Contact Details

Manuscripts should be submitted to the General Editor, Jeff Snyder. E-mail: [email protected]

[C] Submission Guidelines

[1] Manuscripts should be submitted electronically, in Word format, via e-mail. [2] Submitted manuscripts are understood to be final versions. They must not have been published or submitted for publication elsewhere.[3] Articles should not exceed 7,500 words. [4] Only articles in English will be considered for publication. Manuscripts should be written in standard English, while using ‘ize’ and ‘ization’ instead of ‘ise’ and ‘isation’. Preferred reference source is the Oxford English Dictionary. However, in case of quotations the original spelling should be maintained. In case the complete article is written by an American author, US spelling may also be used. [5] The article should contain an abstract, a short summary of about 100 words. This abstract will also be added to the free search zone of the Kluwer Online database.[6] A brief biographical note, including both the current affiliation as well as the e-mail address of the author(s), should be provided in the first footnote of the manuscript.[7] An article title should be concise, preferably with a maximum of 70 characters.[8] Special attention should be paid to quotations, footnotes, and references. All citations and quotations must be verified before submission of the manuscript. The accuracy of the contribution is the responsibility of the author. The journal has adopted the Association of Legal Writing Directors (ALWD) legal citation style to ensure uniformity. Citations should not appear in the text but in the footnotes. Footnotes should be numbered consecutively, using the footnote function in Word so that if any footnotes are added or deleted the others are automatically renumbered. [9] Tables should be self-explanatory and their content should not be repeated in the text. Do not tabulate unnecessarily. Tables should be numbered and should include concise titles. [10] Heading levels should be clearly indicated.

For further information on style, see the House Style Guide on the website: www.kluwerlaw.com/ContactUs/

[D] Review Process

[1] Before submitting to the publisher, manuscripts will be reviewed by the General Editor and may be returned to author for revision. [2] The journal’s policy is to provide an initial assessment of the submission within thirty days of receiving the posted submission. In cases where the article is externally referred for review, this period may be extended.[3] The editor reserves the right to make alterations as to style, punctuation, grammar etc.[4] The author will also receive PDF proofs of the article, and any corrections should be returned within the scheduled dates.

[E] Copyright

[1] Publication in the journal is subject to authors signing a ‘Consent to Publish and Transfer of Copyright’ form. [2] The following rights remain reserved to the author: the right to make copies and distribute copies (including via e-mail) of the contribution for own personal use, including for own classroom teaching use and to research colleagues, for personal use by such colleagues, and the right to present the contribution at meetings or conferences and to distribute copies of the contribution to the delegates attending the meeting; the right to post the contribution on the author’s personal or institutional web site or server, provided acknowledgement is given to the original source of publication; for the author’s employer, if the contribution is a ‘work for hire’, made within the scope of the author’s employment, the right to use all or part of the contribution for other intra-company use (e.g. training), including by posting the contribution on secure, internal corporate intranets; and the right to use the contribution for his/her further career by including the contribution in other publications such as a dissertation and/or a collection of articles provided acknowledgement is given to the original source of publication.[3] The author shall receive for the rights granted a free copy of the issue of the journal in which the article is published, plus a PDF file of his/her article.

Editorial Board

Edwin Vermulst, VVGB Advocaten, Brussels, Belgium, Immediate Past General EditorJohn P. Barker, Arnold & Porter, Washington, DCLourdes Catrain, Hogan Lovells, Brussels, BelgiumPatricio Diaz Gavier, Sidley Austin LLP, Brussels, BelgiumLaura Fraedrich, Kirkland & Ellis, Washington, DCGary Horlick, Law Offices of Gary N. Horlick, Washington, DCArnaud Idiart, Corporate Export Control Advisor of EADSs HQ and affiliates in FranceJesse G. Kreier, Counsellor and Chief Legal Officer, Rules Division, World Trade OrganizationMichael Lux, Graf von Westphalen, Brussels, BelgiumKunio Mikuriya, Secretary General, World Customs OrganizationJames J. Nedumpara, Jindal Global Law School, IndiaFernando Piérola, ACWL, Geneva, SwitzerlandProf. Dr. Reinhard Quick, Verband der Chemischen Industrie, e.V., Frankfurt, GermanyDavide Rovetta, Grayston & Company, Brussels, BelgiumCliff Sosnow, Fasken Martineau, Ottawa, CanadaPaolo R. Vergano, FratiniVergano, Brussels, BelgiumDr. Carsten Weerth, Main Customs Office Bremen; Lecturer for International Trade Law, Jacobs University BremenSamuel X. Zhang, SZ Legal, Hong Kong

2013 Reform of Germany’s Export Control Act

Tobias Caspary & Tino Eckert*

Changes to the German national export laws address modernization, reform, and among other issues the penalties regime, including a new provisionon voluntary self-disclosure. This article provides a practical summary of these important changes.

1 INTRODUCTION

The German Export Control Act (the Außenwirtschaftsgesetz– ‘AWG’) forms the core of Germany’s export controlregime. It governs foreign trade, i.e., trade of goods,services, capital, financial transfers and other businessbetween the Federal Republic of Germany and othercountries.1 It also applies to situations occurring outsidethe territory of Germany, where the acting person is aGerman citizen.2

In January 2013, a major overhaul of the AWG –initially adopted in 1962 – was agreed by the GermanParliament. It will take effect, at the earliest, on 1 August2013.3 Reasons for the AWG’s reform as well as keychanges will be summarized in (Part 2) and (Part 3),respectively. The analysis focuses on the revised penaltyprovisions as well as the new possibility for voluntary self-disclosure. Part 4 then concludes and summarizes.

2 OBJECTIVES OF THE AWG REFORM

The new AWG maintains the key principles of theGerman export control regime, in particular, the notionthat foreign trade is generally free (section 1 AWG), andonly trade of defence goods remain subject to strict exportcontrols (and, to a lesser degree, dual-use goods).

2.1 Simplification and Consolidation ofGermany’s Export Controls

One of the main objectives of the reform is to streamlinerules in the interest of exporters, in particular small- andmedium-sized German companies.4 According to theGerman legislator, after fifty years and numerous changes,the previous AWG (as well as the implementing exportcontrol regulation, the Außenwirtschaftsverordnung (AWV))

Notes* Dr Tobias Caspary (London/Frankfurt) and Tino Eckert (Frankfurt) are members of Fried Frank’s International Trade and Investment Practice. The authors express their

appreciation to The Honourable Mario Mancuso, partner, Fried, Frank, Harris, Shriver & Jacobson LLP and the Chair of the firm’s International Trade and InvestmentPractice. The opinions expressed are those of the authors and do not necessarily reflect the views of the firm.

1 Section 1(1) sentence 1 AWG, see also comments by the German government of 15 Aug. 2012 – www.bundesregierung.de/Content/DE/Artikel/2012/08/2012-08-15-neues-aussenwirtschaftsgesetz.

2 See, e.g., sec. 17(7) AWG.3 According to No 4 (Art. 4) of BT- Drucks 17/12101, the AWG will take effect ‘on the first day of the third month following publication’ in Germany’s Official Gazette since

the Act has not yet been published as of 30 Apr. 2013, the AWG reform will take effect at the earliest on 1 Aug. 2013.4 See Andreas G. Lämmel, plenary protocol 17/219 of 31 Jan. 2013, speech on consultation of the draft act to modernize the export control law, 27295; Explanation of the draft

act of 15 Aug. 2012, 49.

ARTICLE

167Global Trade and Customs Journal, Volume 8, Issue 6© 2013 Kluwer Law International BV, The Netherlands

resembled an incoherent legal framework.5 The Germanexport control regime aims to create a more simplifiedstructure, e.g., by reducing the AWG sections from fiftyto merely twenty-eight.6

2.2 Harmonization with EU Law

In addition, EU law has evolved significantly since 1961.7

National competences in the area of export controls havebeen deferred to the European Union (EU) or have beenharmonized by EU law. For instance, since 2009 the Dual-Use-Regulation8 provides a European-wide harmonized setof rules on the treatment of goods that have both a civiland a military purpose. Moreover, the EU has assumed far-reaching responsibilities in the area of the CommonForeign and Security Policy (CFSP) which are everincreasingly exercised by the EU.9 As a result, Germanprovisions are adapted to EU requirements andterminology.10

2.3 Revision of Penalties

The provisions on penalties have been significantlyrevised, to ensure a more effective prosecution ofinfringements. Additionally, the German legislator hasresponded to criticism voiced by Germany’s higher courtsregarding the vague wording of some penalties, byremoving unclear legal terms.

3 SPECIFIC CHANGES

3.1 Structure

The new AWG generally keeps the structure of the oldact. It is divided into three parts: (i) part 1 coversprovisions on ‘Legal Transactions and Acts’ (sections 1–9AWG), which describes general principles, definitions andlegal bases; (ii) part 2 contains ‘Supplementary Provisions’(sections 10–16 AWG), which deal in particular with

procedural and administrative issues, competencies as wellas questions on the validity of legal transactions that occurin contravention of export control rules; and (iii) accordingto its heading, part 3 covers ‘Penalties and transitionalprovisions’, although transitional provisions have beenomitted (sections 17–28 AWG).

3.2 Revised Penalty Regime

3.2.1 New Hierarchy of Criminal Offences

The core of the AWG reform is a fundamental overhaul ofthe provisions on criminal and administrative offences(sections 17–19 AWG).11 For greater alignment withadequate levels of liability,12 the reform has both increasedand reduced relevant penalties. There are three maincategories, based on the gravity of the infringement: (i)Infringements of arms embargoes will be prosecuted ascrimes; (ii) violations against other significant restrictivemeasures under EU or German export controls will beclassified as misdemeanours (e.g., export restrictions, dutyto freeze assets, compliance with dual-use provisions); and(iii) less severe infringements will be penalized by way ofan administrative fine.

3.2.2 Infringements of Arms Embargoes (Section 17AWG)

Increased level of penalties. Violations of UN and EU armsembargoes are considered as hardcore infringements andwill be punished more severely in the future. Themaximum penalty has been doubled from previously fiveyears to ten years imprisonment – a remarkable upperlimit considering that the maximum term ofimprisonment under German criminal rules is generallyfifteen years. Further, a new minimum fine of at least oneyear of imprisonment has been introduced; as a result,violations of UN and EU arms embargoes areautomatically classified as crimes under German criminal

Notes5 See Draft Act for the Modernization of the Export Control Law – Frequently Asked Questions (as of: 15 Aug. 2012), No 1; Erich G. Fritz, plenary protocol 17/219 of 31 Jan.

2013, speech on consultation of the draft act to modernize the export control law, 27293.6 See Draft Act for the Modernization of the Export Control Law – Frequently Asked Questions (as of: 15 Aug. 2012), No 2. The reform of the AWG goes in hand with the

revision of the implementing export control regulation (Außenwirtschaftsverordnung - AWV). Since the reform of the AWV has not yet been completed, it will be analysed at alater stage.

7 Erich G. Fritz, plenary protocol 17/219 of 31 Jan. 2013, speech on consultation of the draft act to modernize the export control law, 27293.8 Council Regulation 428/2009 of 5 May 2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items, 2009 OJ 134/1

(The ‘EU-Dual-Use Regulation’).9 See also Explanation of the draft act of 15 Aug. 2012, 49.10 Cf., former sec. 4 AWG; Explanation of the draft act of 15 Aug. 2012, 50 et seq.11 Explanation of the draft act of 15 Aug. 2012, 69.12 Press release, federal cabinet – Draft Act for the Modernization of the Export Control Law – Frequently Asked Questions (as of: 15 Aug. 2012), No 5.


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rules (instead of misdemeanours as was previously thecase).13 The consequences of such classification aredescribed below.

Qualifications. In addition, section 17 AWG contains twoqualifications and, if applicable, increases the maximumpenalty from ten to fifteen years.14 The provision coversviolations that are committed commercially or15 as part ofa gang activity as well as a new qualification concerningacts undertaken on behalf of a foreign intelligence service(section 17(2) No. 1 AWG).16 Since intelligence serviceswould be able to ‘endanger the objectives of export control lawsto a particular significant manner’, the German legislatorconsidered it appropriate to ‘increase level of penalties’ onsuch violations.17

The new qualification may be influenced partly byexperiences of German authorities with agents from theIranian intelligence services, who in the past hadattempted to acquire German goods in circumvention ofapplicable export control rules.18 Acting in Germany for aforeign intelligence service is already subject to a penaltyunder general criminal rules of up to five yearsimprisonment, and in particular severe cases of up to tenyears imprisonment.19 The new qualification is likely tobe met if a person, at least functionally and by activecooperation, is integrated in such foreign service.According to precedent, such integration may already beassumed after organizing the first illegal shipment ofgoods.20

Reckless acts (‘leichtfertige Begehung’). While the AWGgenerally does not prosecute negligent violations of exportcontrol rules as crimes or misdemeanours, a recklessinfringement of an arms embargo can be punished withimprisonment of up to three years imprisonment or fine,section 17(5) AWG. In accordance with general criminallaw terminology, a reckless violation would require aperson to act grossly negligent, without observing what

would have been evident under the relevant circumstanceson the basis of his knowledge and capabilities. Whether anact was committed recklessly will be determined on a case-by-case basis. However, in light of new section 18(11)AWG (as discussed below), the acting person would not bedeemed reckless if at the time of his actions, he did nothave knowledge about the arms embargo, and suchembargo came into effect recently.21

Consequences of classification as a crime. Due to theclassification as a crime, different criminal rules apply. Inparticular: (i) it is no longer possible to terminateproceedings without a court hearing, as had previouslybeen possible, by the prosecutor (with or without paymentof a fine)22 or the court by way of penalty order.23

Consequently, companies will be exposed to courtproceedings (which are generally open to the public)which could lead to reputational damages in addition tothe actual fine being imposed on the individual; (ii) in thefuture even the attempt to participate can be prosecuted;24

(iii) in addition, the court may disqualify the perpetratorfor up to five years from holding any public office;25 and(iv) in contrast to the old law, violations of armsembargoes will no longer be heard by the inferiorAmtsgerichte (local courts)26 but instead by the Landgerichte(regional courts).

Given the complexity of the criminal provisions in theAWG, it could be appropriate to empower the Germanstates to appoint special regional courts dealing with thesematters. The new section 22 AWG foresees such apossibility, although it is unclear why this provision hasbeen limited to appointing a special local court (as theyonly deal with the less severe misdemeanours).

Covered arms embargoes. Section 17 AWG covers infringementsagainst UN and EU arms embargoes, but only after theyhave been transposed into German law by way of a nationalregulation within the meaning of section 4(1) AWG. By

Notes13 Cf. sec. 12 German Criminal Act (StGB).14 Section 38(2) StGB.15 The minimum fine increases to two years imprisonment if the perpetrator acts commercially and as a gang member, sec. 17(4) AWG. See also LG Essen, judgment of 25 Jan.

2008, 56 KLs 31/07 on acting commercially.16 A similar provision is also contained in sec. 19(7) AWG.17 Explanation of the draft act of 15 Aug. 2012, 73.18 See, e.g., German Supreme Court, order of 19 Jan. 2010, StB 27/09.19 Section 99 StGB.20 Cf., German Supreme Court, order of 14 Jul. 2005, StB 9/05.21 Section 17(11) AWG grants a two-day grace period after publication of the relevant measure in the OJ.22 Section 153, 153a German Criminal Procedure Act (StPO).23 Section 407 StPO.24 Section 30 StGB.25 Section 45 StGB.26 Section 74 German Code on Court Constitution (GVG).


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contrast, penalties under section 18 AWG may already applyif an EU-sanction has been breached after its publication inthe Official Journal of the European Union (OJ) (see belowPart 3.2.3).

Notably, higher penalties will apply only to armsembargos that concern arms, ammunition and otherweapons material pursuant to Part I Chapter A of the armslist, section 17(1) AWG. Trade restrictions on other items,e.g., dual-use goods, fall outside the scope of aggravatedpenalties.27

3.2.3 Violations of Other Important Export ControlRules (Section 18 AWG)

General changes. In addition, penalties for intentionalviolations of other important export rules (section 18AWG) have been revised. This includes, for instance,ignoring EU restrictions on exports, transfer and sale ofsanctioned goods. The new law now also penalizesviolations against the ban to make assets or financialresources available to sanctioned persons as well asinvestment bans (sections 18(1) and (2) AWG).28

Conversely, the new AWG does not penalizeinfringements of the prohibitions to engage in actionsdesigned to circumvent EU sanctions.29 Given the broadwording of the circumvention rules, the German legislatorhad constitutional concerns that any penalty would violatethe principle of legal certainty.30 Nevertheless, certainattempts to circumvent export control rules may becaught by the general prohibition in combination withcriminal law principles on instigation (Anstiftung) andindirect perpetratorship (mittelbare Täterschaft). Indeed, theGerman legislator considers that the application of theseprinciples could lead to a conviction, e.g., where economicresources would be provided to sanctioned individuals viathird parties or third countries.31

Finally, penalties can now be trigged by violation ofrelevant EU sanctions as soon as they are published in thein the OJ. Thus far, German authorities could only punishinfringements of those export control rules that hadbeen published in Germany’s Federal Gazette (the

Bundesanzeiger).32 As a result, German exporters will needto inform themselves accordingly (the additional burden,however, should be limited given that most complianceprogrammes used by companies already cover the OJ).

The two-day grace period. Simultaneously, with attachingcriminal liability to the OJ, the AWG also introduces anew personal excuse – a two-day grace period, section18(11) AWG. A violation of EU sanctions will not bepunishable if such violation occurred within two businessdays after the publication in the OJ of the relevantsanction, and the perpetrator did not know about the newrules. The German legislator considers that it would bepossible and reasonable for relevant companies to updatetheir internal compliance software accordingly.33

Modified level of penalties. Importantly, penalties forexporting dual-use goods without a license have beentightened, section 18(5) AWG, by treating them asmisdemeanours (as opposed to administrative finespreviously). This empowers the criminal judge to imposejail sentences. Non-compliance with rules on transit orintra-community transfers of dual-use goods, however,will remain punishable as administrative offences only.34

Conversely, the minimum penalty for violating theprohibitions and approval requirements in section 18(1)AWG has been reduced from six to three months. Thiswill allow, in less severe cases, the imposition of apecuniary fine in lieu of a prison sentence.35 Finally, theattempt to infringe export control rules is also punishable,section 18(6) AWG.36

3.2.4 Administrative Fines (Section 19 AWG)

Level of fine. Infringements of other export controlprovisions will be prosecuted with an administrative fineof up to EUR 100,000 (approximately USD 130,000),section 19(6) AWG.37 By way of example, furnishingincomplete or incorrect information to the German or EUauthorities in the context of an approval procedure wouldbe covered, under sections 19(2) and (5) AWG. While thelevel of fine does not appear high, it will be possible for

Notes27 See, e.g., EU sanctions against Iran, which cover also an embargo of many dual use goods, see Art. 1(1) Order 2010/413/CFSP concerning restrictive measures against Iran as

amended by decision 2012/35/CFSP.28 Explanation of the draft act of 15 Aug. 2012, 75.29 Explanation of the draft act of 15 Aug. 2012, 75.30 See, e.g., German Constitutional Court, NJW 2004, 2213, 2219; German Supreme Court, Order of 13 Jan. 2009, AK 20/08.31 Explanation of the draft act of 15 Aug. 2012, 75.32 See former sec. 34(4) No. 2 AWG.33 This currently includes EU sanctions against Iran and Syria on certain investments.34 Explanation of the draft act of 15 Aug. 2012, 78.35 Explanation of the draft act of 15 Aug. 2012, 74, see also sec. 47 StGB.36 See, e.g., Court of Appeals Munich, judgment of 29 Sep. 2006, 4St RR 177/06 on an attempted violation of an arms embargo.37 Explanation of the draft act of 15 Aug. 2012, 69.


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the authorities to also confiscate illegally obtained goodsor a sum of money corresponding to the value of what wasobtained illegally, section 20 AWG.38

Negligent conduct. Moving forward, negligent infringementsare only punishable with an administrative fine.39 This is toavoid unnecessary criminalization of employees of theexporter. Indeed, the German legislator expressly recog-nized that ‘processing mistakes’ may occur while dealingwith export-related tasks, even if acting individuals are gen-erally adhering the law, and compliance measures are inplace. The threat of an administrative fine – as well as thepossibility to consider a lack of reliability in the context ofthe approval process – is deemed sufficient to deal with suchinfringements.40

3.3 Voluntary Self-Disclosure (Section 22(4)AWG)

A further novelty is the possibility of a voluntary self-disclosure, as per new section 22(4) AWG. This provisionwas introduced at a very late stage of the legislativeprocess.41 According to this provision, a violation will notbe prosecuted provided it ‘was detected through internalaudits and reported to the competent authorities as well asappropriate measures to prevent violation for same reason havebeen adopted’, section 22(4) sentence 1 AWG.

The new provision reminds of established US rules onvoluntary self-disclosure (VSD), while differences remain,e.g., with regard to their respective scope of application.While US VSD rules generally apply to any infringementof relevant export control rules, the scope of application ofthe new section 22(4) sentence 1 AWG is relativelynarrow:

– First, a self-disclosure must be ‘voluntary’, i.e., thecompetent authority has not commenced its owninvestigations, section 22(4), sentence 2 AWG.

– In addition, immunity from fines is only available fornegligent violations in less severe cases. This includes,for instance, an incomplete, incorrect or delayed

submission of information to the relevant authorities(section 19(2) AWG and section 19(5) Nos. 1 and 2AWG); violation of export control rules based onGermany’s security interests (section 19(3) No. 1 aAWG) and non-compliance with certain procedural andreporting obligations (section 19(3) No. 1 b AWG).

– By contrast, perpetrators will not benefit from the newrules if an infringement of export control rules wascommitted intentionally. This will arguably alsoinclude cases, where the perpetrator exported goodsillegally because he was not aware that an approvalrequirement existed.42

– Finally, a self-disclosure will not guarantee immunityfrom fines if the perpetrator recklessly ignored an armsembargo (section 17(5) AWG) or negligently infringedimportant other export control rules (i.e., those listed insection 18(1) AWG).

The new rule is a positive development and despite itslimited scope of application, it will provide furtherincentives to implement a robust export complianceprogramme. Indeed, the new rule may cause a ‘dominoeffect’ by also inducing self-disclosures for areas notcovered by section 22(4) AWG. While there is noguarantee for full immunity from punishment, such self-disclosures may be recognized by the authorities as amitigating factor when setting the fine level43 or,respectively, in cases of misdemeanours (pursuant tosection 18 AWG) may induce the prosecutor to terminateproceedings.44

3.4 NewTerminology

Also, the catalogue of definitions has been revised in partone of the AWG and is now in one provision, inalphabetical order in section 2 AWG.45 The terminologyhas been modernized and, where possible, harmonizedwith the EU Dual-Use-Regulation.46 While substantialchanges remain limited, is the revised definition for

Notes38 In combination with sec. 73 StGB; see, e.g., German Supreme Court, judgment of 19 Jan. 2012, 3 StR 343/11.39 But for the reckless violation of arms embargoes (sec. 17(5) AWG) as noted above.40 Explanation of the draft act of 15 Aug. 2012, 69.41 Federal Parliament, Drucksache 17/12101, 3.42 Cf., Regional Court Berlin, judgment of 30 Nov. 2005 (514) 83 Js 86/02 KLs (14/05).43 Cf., sec. 46 StGB and sec. 17 Administrative Offense Act.44 Pursuant to sec. 153, 153a StPO.45 Consolidating former secs. 4, 4a AWG and former secs. 21b und 23 AWV.46 Erich G. Fritz, plenary protocol 17/219 vom 31 Jan. 2013, speech on consultation of the draft act to modernize the export control law, 27293. Outdated terms ‘economic

area’ and ‘foreign economic area’ have been abolished as well as unnecessary definitions for ‘gold’ and ‘country of purchaser’. Cf., explanation of the draft act of 15 Aug. 2012,53.


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‘export’ – which previously included exports to other EUMember States and non-EU Member States47 should bemaintained. In order to harmonize with EU terminology,only exports to non-EU Member States will be defined asexports moving forward,48 while ‘exports’ to EU MembersStates are now defined separately as transfers (sections 2(3)and (21) AWG). The reason for this revision is thedifferentiated treatment under the EU Dual-Use-Regulation, whereby generally no license is required forintra-community transfers of dual-use goods.49

3.5 Abolishment of Peculiar GermanProvisions

Finally, to reduce the bureaucratic burden for companiesand to avoid disadvantages vis-a-vis competitors based inother EU Member States, the reform abolishes variousprovisions peculiar to German law.50 This includes, forinstance, special provisions dealing with exports of dual-use goods and approval requirements that do not exist inother Member States (dating back to pre-EU Dual-Use-Regulation). Many legal requirements that have not beenused for over fifty years have been abolished.51

4 SUMMARY

The reform of the AWG has brought a comprehensivelystreamlined and modernized German export controlregime. While the general structure and core principlesare maintained, the penalty provisions have beenfundamentally overhauled. The reform includes inparticular:

– A fundamental revision of the penalty provisions(sections 17–19 AWG) leads, on the one hand, tohigher penalties for violations of arms embargoes andthe Dual-Use Regulation; and on the other hand,negligent non-compliance with most export controlrules will only be punished with an administrative finemoving forward.

– Adding criminal liability to restricted measures as soonas they are published in the OJ, together with a two-day grace period after publication during whichcompanies are expected to have updated their internalcompliance software.

– A new provision for voluntary self-disclosure for lesssevere unintentional ‘processing mistakes’ if detectedduring internal audits.

– Consolidation and streamlining of terminology, whileavoiding vague legal notions.

– Abolishment of peculiar German provisions.

The objective of the German government to provide for amodern, clearly formulated export control regime for anexport-oriented economy would seem, by and large, anaccomplished one. The significant reduction of rules andsimplification of the AWG’s wording will allow for easierapplication; additionally, particularly those companiesexporting from Germany and other EU Member Stateswill find the harmonization with EU terminology helpful.The revised system of penalties coupled with the newvoluntary self-disclosure rule will stronger incentivize andreward the implementation of a robust complianceprogramme.

Notes47 See former sec. 4(1) No. 4 AWG.48 Cf., Art. 2 No. 2 (iii) Dual-Use Regulation.49 But for particularly sensitive goods as listed in Annex IV Dual Use Regulation.50 Explanation of the draft act of 15 Aug. 2012, 49.51 See Draft Act for the Modernization of the Export Control Law – Frequently Asked Questions (as of: 15 Aug. 2012), No 2.


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Global Trade and Customs Journal - Fried Frank