Export controls

In 2016, Rheinmetall Automotive generated approximately 80% of its sales abroad, and this trend will continue. International goods trade is a very complex subject. All countries have their own regulations on export control, taxes and customs procedures that absolutely must be adhered to.

While 160 countries have joined the World Trade Organization (WTO), which generate more than 90% of the world’s trade volume, not everything runs smoothly in global trade. This is because while WTO members must remove trade barriers, other trade obstacles arise such as technical standards and special certificates that countries use in attempt to protect their domestic industry from too much international competition. Apart from the nearly unlimited domestic market in the EU, there are other free trade zones with their own rules outside Europe, such as in North and Central America (NAFTA), South America (Mercosur) and Asia (Asean). There are also bilateral or multinational agreements among countries that must be observed.

Based on the Trade Compliance Guideline, Rheinmetall Automotive has continually expanded its foreign trade organization in years past, so that the diverse national and international requirements are met and all relevant internal processes are harmonized to the largest extent possible.

The key element in the area of customs and trade is goods classification. The number one rule is: There is only one customs tariff number for each product. This number (which can be obtained if needed from the customs authorities using a “binding customs tariff request”) indicates what can and cannot be done with the respective product. This ranges from customs duties to export restrictions to environmental requirements.

The team of experts for the German foreign trade commissioner advises the Executive Board and divisions of Rheinmetall Automotive on all issues relating to customs and foreign trade law along the value chain -- from procurement to production to distribution. Regular communications are maintained with the regional customs and foreign trade experts. This is only means to identify what governments will do when it comes to import and export handling and export control at an early stage.

Experienced war weapons control and export officers are employed on site at every Rheinmetall Defence company to ensure compliance with the particularly stringent provisions of the German Weapons of War Control Act and the no less strict German and European foreign trade laws and particularly that an appropriate approval has been obtained for each procedure requiring one.

All companies dealing with war weapons are subject to comprehensive monitoring provisions. Each movement of war weapons, without exception, must be documented in the “War Weapons Book.” These War Weapons Books must be submitted to the supervisory authority, the Federal Office of Economics and Export Control (BAFA), on a half-yearly basis.

There, each individual entry is examined to check whether it was covered within the existing approval parameters. Maintaining the War Weapons Book entails high administrative costs. Over 18,500 entries were made at Rheinmetall Defence in 2016. With regard to other military equipment under the Foreign Trade and Payments Act (AWG)/ Foreign Trade Regulations (AWV), there were nearly 700 applications for export licenses. This does not include exports made on the basis of general approvals (e.g. temporary exports, supplies made to EU armed forces and certified recipients). These may amount to two to three times the number of individual approvals. Furthermore, all locations with war weapons are visited on a regular two-year cycle by external inspectors from BAFA who check thoroughly whether the inventories in the War Weapons Book correspond with the actual circumstances on site. They also examine whether each entry is based on a correct record.

In addition to the inspections under the German Weapons of War Control Act, there are also foreign trade audits by the customs authorities. Every three years, all Rheinmetall Group companies are visited. The audits check whether exports followed the applicable provisions of foreign trade laws. In some Group companies the inspections last several months. The standard applied by the customs authorities is extremely high.

The facilitation of supplies within the EU – Directive 2009/43/EC of May 6, 2009 “to simplify the terms and conditions of transfers of defence-related products within the Community” (OJ EU of June 10, 2009, L 146, 1 – “ICT Directive”) – is aimed at simplifying deliveries of military equipment within the EU. In particular, it aims to enable deliveries between certified companies to be made on the basis of general approvals, quickly and without bureaucracy.

The Federal Republic of Germany implemented the ICT Directive in national legislation in 2011. Currently, Rheinmetall Waffe Munition, Rheinmetall MAN Military Vehicles and Rheinmetall Defence Electronics are ICT-certified. Rheinmetall Landsysteme is in the process of certification. However, the simplifications are still somewhat limited at the present time. This is because only very few companies within the EU have undergone certification. However, the benefits will set in once the major EU companies in the sector have followed Rheinmetall’s example.