Export controls and sanctions

According to the German Federal Office of Economics and Export Control (BAFA), export control means, "above all, that the delivery of goods, technology, or even software and data processing programs (these three are grouped together under the umbrella term 'goods') to other countries may be subject to authorization." The basic reason for these controls is that such exchanges can, even unintentionally, support the arms efforts of certain players.

As an exporting nation, Germany has a special responsibility to ensure open trade and, at the same time, to safeguard peace and stability worldwide. The automotive industry, with its cross-border business models, has not traditionally been the focus of export controls. However, with the advances in connected and automated driving as well as electromobility, export control issues have also begun playing an increasingly large role for companies within the automotive industry for some years now.

In the export sector, questions of the obligation to control AI ("dual-use") goods and their destination and application, as well as their administrative requirements and specifications, are of particular importance.

National and supranational export control legislation is decided on the basis of product lists held by the international export control administrations.

The VDA campaigns for avoiding control hurdles affecting the export of VAF-relevant technology installed in vehicles. In discussion with the relevant players – for example, the BAFA or German government – we are working toward exemptions in the lists for civilian vehicle construction on an international, European, and national level. First of all, it is important to raise awareness of the fact that the innovative technologies that are increasingly being installed in our vehicles (such as radar systems, sensors, and encryption technologies for reading data) mean that civilian vehicle construction is also potentially subject to conflicting export control regulations and issues. However, international regulations have so far been aimed primarily at sustainably preventing the distribution of conventional weapons, dual-use goods, warfare agents, and carrier technology, and are not designed for the rapidly advancing technological developments in the "bulk business" of civilian automotive manufacturing.

The negative example of frequency converters, which became subject to control a few years ago, has already shown the considerable administrative difficulties faced by automotive manufacturers and suppliers when standard components used in civilian automotive manufacturing are subjected to authorization. It is, therefore, essential that potential export control requirements remain manageable for the automotive industry in the future. The key elements here are legal certainty and transparency regarding the treatment of new technologies in terms of export control law. The VDA is working to ensure that in this respect, too, Germany retains its leading role in both automated and connected driving as well as in advancing electromobility.

Current developments, including the increasing imposition of extraterritorial sanctions (in violation of international law), particularly by the USA, mean that companies are facing entirely new, difficult challenges in the area of export control. Especially when markets are affected that play a larger role for the German automotive industry, these sanctions can pose a significant threat to supply chains, as they also usually appear at very short notice and are accompanied by a (deliberately) high degree of legal uncertainty for companies.

Those instruments, on the other hand, that are used by other nations to send a political message condemning the imposition of extraterritorial sanctions (e.g., the EU Blockade Statute) often result in companies with global business relationships and supply chains being caught in a classic dilemma regarding compliance with either one or the other regulatory administration.

Thus, extraterritorial U.S. sanctions against European companies ultimately demonstrate the limited ability of the EU to act. It is crucial that the EU becomes more dominant in this respect. The common market is Europe's greatest asset, and this weight should be used more to counter a broad interpretation of effective coercive measures, including types of extraterritoriality.

The VDA observes and follows developments with regard to the increasing use of sanctions worldwide as a way of manipulating both trade and foreign policy, and brings the combined (potential) concern of companies in the automotive industry to the attention of the relevant decision-makers.