# Export Control

## Goals

The purpose of this procedural instruction is to ensure compliance with the legal provisions governing foreign trade and payments.
Section 1 of the German Foreign Trade and Payments Act (AWG) is based on the principle of freedom of foreign trade and payments. According to § 4 AWG, however, restrictions are possible, above all in order to

* guarantee the security of the Federal Republic of Germany
* prevent a disturbance of the peaceful coexistence of nations, or
* to prevent the foreign relations of the Federal Republic of Germany from being significantly disrupted.

On this basis, the German Foreign Trade and Payments Ordinance (AWV) and several EU regulations contain specific prohibitions and licensing requirements. In this context, the export list, the EU regulations on embargoes (including their lists of goods) and the sanctions lists (the terror lists and the lists of persons subject to country embargoes) must be taken into account in particular. The regulations mentioned can be viewed on the BAFA website (www.bafa.de).

A well-functioning internal export control primarily depends on a timely and precise exchange of information between the individual functional units of the company. The review of foreign trade transactions by the export control office can only be successful if all parties involved are aware of the information required for decision-making and the resulting procedures.
In case of doubt, unauthorized action by individuals is detrimental to the company and its employees and may lead to severe sanctions by the control authorities against the person responsible for exports, the export control officer or deputy export control officer, the company or possibly even the individual employee.

## Scope

From a factual point of view, this Organizational Instruction covers all pending sales, export transactions, purchases, services, technical support, know-how transfers or know-how sales, foreign payments and personnel matters. From a personal point of view, these Organizational Instructions apply to all employees involved in these transactions or in the entire business process, irrespective of whether they work as employees (also within the framework of the German Personnel Leasing Act), as salaried employees, as freelancers within the framework of a contract for work and services or as subcontracted employees.

## Regulations and duties

In order to comply with the highly sanctioned export control regulations, the employees are instructed to handle all pending sales, export transactions, purchases, services, technical support, know-how transfers or know-how sales, foreign payments and personnel matters as follows:

## §1

1. The HR department and the procurement department are instructed to check all current and future employees (by HR) as well as all current and future service providers and suppliers (by procurement) to determine whether they are listed on the EU anti-terrorism lists (cf. the current annexes, esp. to EU Regulations 2580/2001 and 881/2002) and on lists of persons on the EU country embargoes, and additionally whether they are listed on the SDN List (Specially Designated Nationals List) of the OFAC (Office of Foreign Assets Controls) of the US Treasury Department with one of the six following designations SDGT (Specially Designated Global Terrorists), SDT (Specially Designated Terrorists), FTO (Foreign Terrorist Organization), NPWMD, Iraq 2 or Burma. The checks should be performed using a nighttime-accelerated export software to achieve the same-day update required by law. If there is a match of at least 85% with the sanctions lists, verification by the export control officer or deputy export control officer is required to ensure that there is no identity with the listed persons; in case of doubt, a lawyer specializing in export law should be consulted. In addition, police clearance certificates should be required, if necessary, at least for current and future employees/service providers who have unrestricted access to all premises or who can be regarded as particularly security-relevant for other reasons. In the case of non-security-relevant service providers, a contractual assurance should be provided, if necessary, that they will check their personnel for compliance with the above-mentioned sanctions lists.
2. Identity with a listed person on the anti-terror list means the prohibition of any business activity with this person - an employee would have to be dismissed immediately and any contact with the service provider/supplier would have to be terminated with immediate effect - while identity with a listed person on the U.S. SDN list leads to the necessity of first obtaining approval from BIS (Bureau of Industry and Security of the Commerce Department) if the transaction is U.S.-related before an employee can be hired or a business contact with a service provider/supplier can be initiated. Due to the constant updates of these sanctions lists, these checks should be repeated at least once per quarter - and in the case of particularly security-sensitive personnel, at least once per month - and documented in writing each time. 
3. Violation of this obligation may constitute a criminal offense punishable by imprisonment of at least 3 months, and may additionally lead to immediate dismissal of the employee of the Human Resources Department. 
4. In case of employment of US persons, purchase of US goods (goods "made in the US") or of US services or goods with US components (incl. with US software or US technology), these persons mentioned in para.1 - current and future employees or current and future service providers/suppliers - have to be checked additionally on the basis of the following US sanctions lists: (1) Commerce Department's Denied Persons List, (2) Commerce Department's Entity List, (3) Commerce Department's List of Nonproliferation Sanctions, (4) Treasury Department's (OFAC) Specially Designated Nationals (SDN) List and SSI List, (5) State Department's Debarred List; in addition, they should also be checked against the Commerce Department's (6) Unverified List, if possible. These checks must be repeated at least once per quarter and documented in writing. Identity with a listed person means prohibition of any business activity with that person, only with the Unverified List it means increased obligation to check for possible risk of proliferation activities, etc. If there is a match with the sanctions lists of at least 80%, verifications are required to ensure that there is no identity with the listed persons; in case of doubt, the export control officer or deputy export control officer must be called in for this purpose, who will check the involvement of a lawyer specializing in export law. Violation of this obligation may result in a U.S. criminal offense or otherwise result in severe sanctions under U.S. export law (see § 3 Para.5).

## §2

1. The Sales Department is instructed to check all existing and future business customers (inside and outside Germany) - the names of the companies/legal entities and, as of 2014, also the names of their legal representatives (managing directors/board members) - not only for their identity but also for whether they are listed on the EU anti-terrorism lists (cf. the current annexes esp. to EU Regulations 2580/2001 and 881/2002) and on lists of persons on EU country embargoes, as well as whether they are listed on the SDN List (Specially Designated Nationals List) of the OFAC (Office of Foreign Assets Controls) of the US Treasury Department with one of the six following designations SDGT (Specially Designated Global Terrorists), SDT (Specially Designated Terrorists), FTO (Foreign Terrorist Organizations), NPWMD, Iraq 2 or Burma. To achieve the same day update required by law, the checks should be conducted using export software that is updated on a same day basis. In the event of a match with the sanctions lists of at least 80%, follow-up checks by the Export Control Officer or Deputy Export Control Officer are required to ensure that there is no identity with the listed persons; in case of doubt, the involvement of a lawyer specializing in export law should be considered for this purpose.
2. Identity with a listed person on the anti-terror list means the prohibition of any business activity with this person - any contact with the business customer would have to be terminated with immediate effect -, while identity with a listed person on the American SDN list leads to the necessity of first obtaining an approval from BIS (Bureau of Industry and Security of the Commerce Department) before delivery to this business customer can be commenced if the transaction is US-related. These checks shall be repeated and documented at least once per annual quarter due to the constant updating of these sanctions lists. 
3. Violation of this obligation could constitute a criminal offense punishable by imprisonment of at least 3 months and may additionally lead to immediate dismissal of the employee of the sales department. 
4. Insofar as deliveries of or services to US goods (goods "made in the US") or goods with US components (incl. goods with US software or US technology) are concerned, these persons mentioned in Para. 1 - current and future business customers - must additionally be checked on the basis of the following US sanctions lists: (1) Denied Persons List of the Commerce Department, (2) Entity List of the Commerce Department, (3) List of Nonproliferation Sanctions of the Commerce Department, (4) Specially Designated Nationals (SDN) List and SSI List of the Treasury Department (OFAC), (5) Debarred List of the State Department; in addition, they should also be checked against the (6) Unverified List of the Commerce Department, if possible. These checks must be repeated at least once per quarter and documented in writing. Identity with a listed person means prohibition of any business activity with that person, only with the Unverified List it means increased obligation to check for possible risk of proliferation activities, etc. If there is a match with the sanctions lists of at least 80%, verifications are required to ensure that there is no identity with the listed persons; in case of doubt, the export control officer or deputy export control officer must be called in for this purpose, who will check the involvement of a lawyer specializing in export law. Violation of this obligation may lead to a US criminal offense or otherwise to high sanctions under US export law (cf. Section 3 (5)).
5. As soon as an order for a sale, an export or a service is received by SDG, it must first be passed on to the sales department so that it can fulfill its duties according to para.1 and para.4. In the event of at least 85% probability of a match, the Sales Department shall submit this transaction to the Export Control Officer or Deputy Export Control Officer for a manual check for identity with the listed person.
6. After this examination has been carried out, the export control officer or deputy export control officer shall be given the order and the written documentation of this examination. The export control officer or deputy export control officer or, on his behalf, the export control officer shall then examine whether there are indications that the customer or the end user could be sensitive (especially suspicious of proliferation) or whether his information appears to be difficult to understand or dubious, so that indications of a suspicion of proliferation could arise. In this case, the export control officer or deputy export control officer shall be called in, who shall either check the involvement of a lawyer specializing in export law or obtain information from the BAFA (Federal Office of Economics and Export Control) - with explicit mention of all suspicious facts - or the competent US export authority.
7. Offers as well as contracts for supplies and services which are subject to licensing under export regulations shall be concluded subject to the proviso that the corresponding export license is granted. Offers for Iran and Russia business should only be concluded subject to a condition precedent.

### §3

(1) The Export Control Officer and Deputy Export Control Officers are instructed to check whether any of the following licensing requirements exist under the Dual-Use Regulation or the Foreign Trade and Payments Ordinance:
- No. 1: whether the goods to be exported (= goods, software, technology) are on the export list (Dual-Use Goods List, Annex I to the Dual-Use Regulation or on the list of military equipment part I A or the list of national dual use items on part I B of the AL in the annex to the AWV, or on lists of goods of the embargo regulations); the staff member responsible for production and technology shall support him in this check; the results of this check shall be recorded in a list which can be viewed in the PC (special attention shall be paid to the check of new goods which are not yet available in the current stock of goods of SDG),
- No. 2: whether there are indications that the non-listed items to be exported could possibly be used in part for or in connection with weapons of mass destruction in any country in the world,
- No. 3: whether there are indications that this export could violate one of the 26 country embargoes currently in force in the EU (as of 01.08.2016) - including by delivery to a possible country of circumvention - by examining the goods affected by delivery bans and the lists of persons subject to the country embargoes (special precautions are required, especially in the case of deliveries to embargoed countries, and if possible a lawyer specializing in export law should be consulted),
- No. 4: whether there are indications that the non-listed goods to be exported could possibly be used for military purposes in one of the EU arms embargo countries currently in force - also by delivery to a possible bypass country,
- No. 5: whether there might be indications that the non-listed goods to be exported could possibly be used for nuclear facilities in one of the 9 countries of Section 9 AWV - also by delivery to a possible bypass country,
- No. 6: in the case of a delivery ("shipment") to another EC state, whether the goods to be exported are listed on Part I A of the German Export List or on Annex IV to the Dual-Use Regulation or whether - in the case of a listing on Part I B of the Export List - there are possible indications that the final destination of the goods is outside the EU,
- No. 7: in the case of a delivery ("transfer") of a non-listed good to another EC state, whether there are indications that the risks mentioned in No. 4 or No. 5 might exist,
- No. 8: in the case of a delivery to a customer in Germany (domestic German delivery), whether there are indications of a subsequent export by the customer and, if the answer is in the affirmative, whether this subsequent export by the customer could be subject to authorization due to listing of the goods or due to the risks mentioned in No. 2 to No. 5,
- No. 9: in the case of the provision of services ("technical assistance") - including those provided within Germany to foreigners or to persons/companies normally residing outside Germany - whether there might be indications of the risks referred to in No. 2 to No. 5,
- No. 10: whether a licensing requirement could arise due to the existence of a trading and brokering transaction or brokering activity (from Art. 5 DUV and Sections 46 et seqq. AWV),
- No. 11: whether any requirements arising from the use of export or customs simplifications or other licensing requirements are complied with in the case of exports (e.g. registration and reporting requirements arising from general licenses, notification requirements due to authorization as an approved exporter, write-off requirements or other requirements such as return periods),
- No. 12: whether reporting obligations under foreign trade law according to §§ 63 ff. AWV - especially for foreign payments from EUR 12,500 or for foreign receivables from EUR 5 million - exist and, if so, whether these and the Intrastat reports are submitted on time,
- No. 13: whether the statistical commodity codes given in export and customs declarations appear conclusive, and
- No. 14: whether there are indications of sensitive uses/re-exports, for which reason at least an end-user certificate should be requested from the customer.
(2) Furthermore, the Export Control Officer or Deputy Export Control Officer is instructed to check whether an additional licensing obligation under US law could be triggered by the existence of a US jurisdiction, by checking:
- No. 1: whether the items to be exported have been shipped from the U.S., are being shipped to the U.S., or are in transit through the U.S,
- No. 2: whether SDG or an affiliate or business partner that could influence business activities of SDG may be considered a "U.S. person",
- No. 3: whether the goods supplied by SDG are US goods (i.e. goods "made in the US") or whether they could contain US components listed (on the Commerce Control List or on a US defense equipment list) with a value share of 10% or 25% (in the case of US embargoes, value shares of 10% or less of US components are also sufficient, irrespective of whether these US components are listed), e.g. by inquiring with the supplier (if the supplier is a US person). e.g. by inquiring with the supplier (if the U.S. components consist of U.S. technology, even a value share of less than 10% may trigger the obligation to prepare a One Time Report to the Commerce Department),
- No.4: whether the goods supplied by SDG are direct products of US technology/US software listed for national security reasons, or:
- No.5: whether the goods are defense products that are at least partially the subject of a contract with a U.S. licensing authority (primarily the State Department).
If one of these five assumptions applies, there is, in case of doubt, a licensing requirement under U.S. law, so that a permit must be obtained from the Commerce Department, the State Department or the Treasury Department. In addition, all U.S. sanctions lists and U.S. embargoes (including the total embargoes against Iran and Cuba) must be reviewed. As a rule, a lawyer specializing in export law should be consulted to clarify these obligations to act or obtain a license and this U.S. jurisdiction.
(3) Duty of documentation and risk minimization:
(a) The audit items listed in Paragraph 1 and Paragraph 2 must be documented in writing and filed in such a way that they are immediately available in the event of an external audit.
b) For the export of listed goods, an end-user certificate must be attached to the application for an export license; the same should be done for non-listed goods if it remains unclear whether the buyer is the end-user. 
c) If it is to be assumed that subsidiaries or sister companies or commercial agents or direct customers of SDG forward the goods supplied by SDG without incorporating them into another item and thereby transforming them into another item for customs purposes, it is imperative that measures be taken to avoid forwarding to sensitive countries or sensitive persons (e.g., the following measures must be taken). sensitive countries or sensitive persons (e.g. by concluding a contract with penalties which effectively obligates the subsidiary, sister, commercial agent, dealer or direct customer to comply with the export control regulations); for this purpose, a lawyer specializing in export law should be consulted.
d) For the verification of the amount of the U.S. components, written confirmations of the suppliers or the responsible U.S. ministry should be obtained. 
e) If there are uncertainties about the obligations to act or vague indications of sensitive uses (e.g. indications of proliferation, circumvention of embargoes, military or nuclear use in sensitive countries), a lawyer specializing in export law must be consulted; if the risk cannot be sufficiently minimized by him, BAFA or the responsible US export authority must be informed about such suspicious facts - the latter will then make a final decision on the question of a licensing obligation.
(4) Obtaining a license: If the examination pursuant to Para. 1 and Para. 2 shows that a licensing requirement may exist, the Export Control Officer and Deputy Export Control Officer are obliged to apply to the German BAFA or the competent US export authority for an export license or a corresponding zero decision - or in the case of the USA: for a license or an advisory opinion; if this is time-consuming, a lawyer specializing in export law should provide legal support or assistance. Possible indications of export violations must be reported immediately to the person responsible for the export; subsequently, a lawyer specializing in export law should be consulted immediately, who should check, among other things, whether a voluntary self-disclosure or another course of action is recommended.
(5) Sanctions for violations: Violation of these obligations under Paragraph 1, through Paragraph 4 constitutes either (in the case of negligence) an administrative offense punishable under German law by a fine of up to EUR 500,000, or (in the case of intent) a criminal offense punishable under German law by imprisonment or a fine; in addition, there is the possibility of revocation of export licenses or existing procedural relief, etc. Sanctions under US law may be higher in individual cases: In the case of embargo violations: Fines up to $1 million and imprisonment up to 20 years, as well as administrative sanctions, especially fines up to $250,000 (or twice the transaction value) per violation; sanctions under the EAR: fines up to $250,000 or $1 million (or five times the value of the export shipment) and imprisonment up to 10 years, as well as administrative sanctions: Fines of up to $100,000 and years of revocation of export privileges (i.e., the right to trade with the U.S., up to approximately 25 years) and revocation of licenses. In addition to the export control officer, these sanctions will generally affect the exporting officer or company. Serious violations will usually result in the immediate dismissal of the export control officer or the removal of the export control officer from the company.
(6) Review of duties under Section 2: The Export Control Officer and Deputy Export Control Officer shall verify whether the Sales Department or the persons responsible for sales have complied with their obligations under § 2; otherwise, he/she shall carry out this verification himself/herself and, in the meantime - on behalf of the person responsible for exports stop any export.
(7) Duty of further training: The export control officer and deputy export control officer shall be obliged to undergo further training in the field of export and customs law by attending appropriate conferences/seminars or print and online media.

## §4

(1) All other employees of SDG, in particular those in the areas of project engineering, construction, assembly, shipping and service, are obligated to obtain the approval of the export control officer or deputy export control officer prior to any export of goods - in particular of samples, models, prototypes, software or technology (including technical documents). It is irrelevant whether
- the goods are to be handed over to the business customer/supplier/contractual partner at the registered office of SDG, the registered office of the business customer/supplier/contractual partner or at a third location or whether
- the goods are to be exported physically (also in hand luggage) or non-physically (by electronic media such as telephone, fax, e-mail, CD-ROM or as a file on a laptop etc.).
The only decisive factor is that the relevant SDG employees have evidence that the goods handed over by them are to be exported from Germany. The name of the person and the company to which the goods are to be transferred must be communicated to the Export Control Officer or Deputy Export Control Officer. Export without the consent of the Export Control Officer or Deputy Export Control Officer is strictly prohibited. 
(2) After notification of the intended export, the Export Control Officer or Deputy Export Control Officer shall carry out the examination set out in § 3 and initiate the necessary legal measures (e.g. application for an export license). Furthermore, the export control officer or deputy export control officer shall arrange for the recipient to be checked for a possible listing in accordance with § 2 of these Organizational Instructions and for the result of the check to be documented in writing. 
(3) After carrying out the checks set out in paragraph 2, the Export Control Officer or Deputy Export Control Officer shall, if the legal requirements are met, grant the requesting employee approval for the export or otherwise stop the export until an export license is available. In cases of doubt or ambiguity, the export control officer or deputy export control officer shall be consulted for this purpose and shall consider the involvement of a lawyer specializing in export law.

## §5

(1) The person responsible for exports and the export control officer shall regularly (the person responsible for exports at least semi-annually, the export control officer at least monthly) verify, e.g. by means of routine checks and spot checks (e.g. product classification, end-use, intended use and partner controls, use of licenses), whether the procedures and measures contained in these Organizational Instructions are being complied with by all persons involved. For this purpose, the Export Control Officer shall report regularly (at least semi-annually) to the person responsible for exports on the implementation of the export control measures in the company. This shall also include an examination of whether these organizational instructions need to be supplemented in order to be able to counter current risks. 
(2) The person responsible for exports and the export control officer or deputy export control officer shall ensure that the export-relevant statutory retention periods and information obligations are observed: 
- To prove that prohibitions and licensing requirements for exports and shipments have been observed (business documents, such as invoices and shipping documents, as well as licensing notices): A retention period of 10 years should be followed, beginning at the end of the year in which the export or shipment occurred.
- In the case of shipments of goods listed in Annex I of the EC Dual-Use Regulation, a note must be included for the customer in the business documents (in particular purchase contracts, order confirmations, invoices or dispatch notes) that the export of these goods from the EC is subject to approval (Art. 22 (10) EC Dual-Use Regulation). 
(3) Furthermore, it is recommended that the person responsible for exports and the export control officer or deputy export control officer regularly check whether foreign subsidiaries, trade representatives or traders of SDG in their exports
- No. 1: comply with the country embargoes currently in force in the EU - including deliveries to a possible circumvention country - by checking the goods affected by delivery bans and corresponding financial restrictions, and
- No. 2: Check the respective consignee for listing in the EU anti-terror lists (cf. in particular the current annexes to EU Regulations 2580/2001 and 881/2002) and for lists of persons on the EU country embargoes.
A liability of the person responsible for exports, the export control officer or the deputy export control officer for foreign trade violations of affiliated companies, traders or commercial agents beyond the legal requirements cannot be derived from the recommendations mentioned in this paragraph 3. The Export Control Officer, the Export Control Representative and the Deputy Export Control Representative shall only act in an advisory capacity at the request of affiliated companies, traders or commercial agents. The legal responsibility for compliance with export control regulations lies with the exporting company or the exporting trader or commercial agent within the framework of the statutory provisions.

## Customs tariff number

1. If available use the tariff number provided from the supplier as a basis
2. Choose or re-check the tariff numbers based on the following priorities:
2.1. Purpose before material
2.2. Detailed description before general description
2.3. Lager tariff number before smaller tariff number

Possible resources for checking tariff numbers are "Warenverzeichnis für die Außenhandelsstatistik" or https://www.zolltarifnummern.de/. 

## Sanction checks

## Annex

"Export" means any cross-border transfer from Germany to other countries - also to other EC Member States - including non-tangible transfer by means of electronic media (cf. Art.2 No.2 iii Dual-Use Regulation) as well as including short-term exports (e.g. for trade fairs). Exports in the sense of these organizational instructions are also deemed to be exports if SDG does not act on its own behalf but, for example, on behalf of another domestic or foreign company in the SDG group. The inspection and action obligations set out in these organizational instructions also apply to such exports. 

"Goods" are: Goods, software and technology, whereby "technology" includes both technical documentation and technical support

"Technical documentation" is, for example, design drawings, models, plans, etc., and "technical assistance" includes all technical services (development, production, assembly, repair, etc.) as well as the transfer of practical knowledge (consulting services, training, etc.).

Sensitive countries according to EC law or German law are:
- Embargoed countries of the EU: 
- https://www.zoll.de/DE/Fachthemen/Aussenwirtschaft-Bargeldver-kehr/Embargomassnahmen/Laenderembargos/laenderembargos_node.html9 Countries according to § 9 AWV: Algeria, Iraq, Iran, Israel, Jordan, Libya, North Korea, Pakistan, Syria;
- Possible countries of circumvention are currently mainly the following countries: United Arab Emirates UAE (Dubai), Pakistan, as well as: China, Hong-kong, Afghanistan, Malaysia, Turkey.
- Before delivery to one of these countries, if there are indications of impending export violations, a lawyer specializing in export law should be consulted to review the risks.

"US Person" means
- a citizen of the U.S., a permanent resident alien of the U.S., a permanent resident alien of the U.S. (e.g. green card holder),
- any company organized under the laws of the U.S. or a U.S. state, including its dependent branches abroad (and in the case of certain U.S. embargoes such as Cuba, North Korea and antiboycott regulations: also its foreign subsidiaries) <foreign country: all countries except the U.S., e.g. Germany>;
- any person temporarily present or staying in the U.S. (only during the period of stay).

Sensitive countries are under U.S. export law:
- According to the EAR (as of Feb. 26, 2020), these are the seven embargoed countries: Iran, Iraq, Cuba, North Korea, Russia and Syria, and Ukraine's Crimea region; plus Sudan, a terrorism-supporting country largely on a par with them.
- According to OFAC regulations, these are currently the following 19 countries (as of 26.02.2020): Yugoslavia successor states, Belarus, Burundi, Central African Republic, Cuba, Democratic Republic of Congo, Iran, Iraq, Lebanon, Libya, Mali, Nicaragua, North Korea, Somalia, Sudan, South Sudan, Syria, Ukraine-Russia, Venezuela, Yemen and Zimbabwe. In particular, it addresses total embargoes on Iran and Cuba, and partial embargoes on Iraq, North Korea, Sudan, Syria, and Ukraine/Russia
- (https://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx).
- Countries of circumvention are at present above all: see above list of countries of circumvention under EU sensitive countries.
- Before delivery to one of these countries, a lawyer specialized in export law should be consulted to check the risks.

Persons responsible for export control see Organigram.
