Exports are vital for the EU’s machinery and plant manufacturers, with the export value for 2022 amounting to 576 billion euros – a new record. However, exporting machinery across national borders is a complex issue.
STRONG EU EXPORTS IN MECHANICAL ENGINEERING
The figures presented by the German Engineering Federation (VDMA) for 2022 are a good sign for the industry. With an export value of 576.4 billion euros, machinery and plant manufacturers in the European Union set a record. The previous year’s figure for machinery exports was once again increased by just over 10%.
EU internal market of particular importance
So-called intra-EU trade, i.e. all exports between the EU member states (EU-27), accounted for just over half of the overall result. However, with a value of 284.1 billion euros, extra-EU trade with countries outside the EU was only just behind.
Conversely, this means that the EU-27 imported significantly more machinery from other EU countries: The share of imports reached around 65%.
Challenge for the logistics sector
On the one hand, these developments are good news for the logistics sector, as they ensure a steady flow of orders. On the other hand, every machine transport requires top logistical performance – and this does not only apply to the technology used.
Exports across national borders are a challenge, particularly in terms of organization, because there are different regulations for machine transport, especially when transferring to third countries outside the EU. Correct documentation is therefore an essential key element for the successful export of machinery and equipment.
GENERAL PREPARATIONS FOR MACHINE TRANSPORTATION
For every machine transport – whether within a country or for export – fundamental questions must be clarified:
- Which vehicles and equipment are required to load the corresponding system onto the transport vehicle?
- How must this transport vehicle be equipped to carry the load without any problems?
- Depending on the distance to the destination, are other transport routes also possible, for example by sea or air freight?
- How should or must the machine/system be packed?
A decisive factor in all planning is the destination itself – for example, for route planning. This is not just about the shortest possible journey times or expected toll charges. Even within the EU, it is sometimes a question of complying with national standards and regulations for transports with a certain load.
Italy, for example, tightened the regulations for heavy goods transportation a few years ago. The granting of permits is therefore linked to precise information on the transport weight, as this is the only way the authorities can ensure compliance with the maximum load for bridges or road trains.
Concessions are only awarded if the stability and safety of the infrastructure along the entire transport route can be guaranteed.
MACHINES AS DANGEROUS GOODS
Since January 1, 2023, new regulations have applied to the transportation of machinery containing potentially dangerous goods (toxic gases, flammable or corrosive substances). According to special regulations in the “Agreement on the Transport of Dangerous Goods by Road” (ADR), such machines and equipment were long exempt from labeling when transported by land – unlike in maritime or air transport.
If there is a dangerous goods classification for the equipment contained (in the internal structure or in the functional elements), the machinery in question must now also be classified and assigned a UN number. The shipper of such machines is responsible for this.
Harmonized regulations facilitate intra-export within the EU
However, the example of Italy should not obscure the fact that the transportation of machinery for export between EU countries is comparatively simple. With the aim of strengthening the EU internal market, largely uniform regulations apply. Due to their dimensions, heavy and special transports should be seen as exceptions anyway.
The requirements become significantly more complex if the export is to a so-called third country. In such cases, a number of additional provisions must be observed. In simple terms, this involves the requirements for export from the EU on the one hand and the regulations for import in the country of destination on the other.
MACHINERY TRANSPORTATION FROM THE EU: BASIC INFORMATION ON CUSTOMS REGULATIONS
If a machine or system is to be exported beyond the borders of the EU, an export declaration is usually required. In addition, the foreign trade restrictions – known as export controls – must be complied with.
Export declarations for machinery transports
A distinction is made between a one-stage and a two-stage export procedure, which are based on certain value thresholds.
- Single-stage export procedures with an export declaration are required for shipments with a value of EUR 1,000 or more. The “customs office of exit”, i.e. the customs office for the external EU border, is responsible.
- Two-stage export procedures apply from a consignment value of 3,000 euros. This involves both the local inland customs office (“customs office of export”) and the customs office of exit mentioned above.
CALCULATE SHIPMENT VALUE FOR EXPORT CORRECTLY
The value thresholds of EUR 1,000 or EUR 3,000 on which an export declaration is based always refer to the statistical value of the shipment and not the invoice value.
To determine the statistical value, the freight costs up to the German border, for example, can be added to the invoice amount on a pro rata basis. The calculation is also always based on the actual value of the shipment. Therefore, even in the case of free replacement shipments, the normal sales prices of the goods must be stated.
There is an electronic procedure set up by German customs for export declarations. The ATLAS export declaration (Automated Tariff and Local Customs Clearance System) can be created by the companies themselves using certified software or free programs from customs (e.g. Internet Export Declaration Plus/IAA Plus).
Alternatively, freight forwarders or customs agencies can take on this task, as a sound knowledge of customs law is required to create the declaration. This applies to the export procedure as such as well as to the necessary codes for customs offices, EORI number (Economic Operators Registration and Identification Number), transport routes used, goods and customs tariff numbers, foreign trade law document abbreviations and much more.
As soon as all the necessary data has been stored in the ATLAS system and customs has given its approval, an electronic “Export Accompanying Document” (ABD) is created, which must be printed out and enclosed with the goods to be shipped.
Foreign trade law restrictions for exports
Under certain circumstances, the export control provisions of EU law and German law apply. There are a total of four grounds for restriction, which are checked independently of each other. If one of these grounds is fulfilled, an export license is required from the Federal Office of Economics and Export Control (BAFA). The following are checked
- the property. The main issue is whether the goods in question are military goods and so-called dual-use goods that can be used for both civilian and military purposes.
- of the recipient, namely to be named on the EU sanctions list or the German early warning list.
- the intended use, especially for goods with a critical intended use.
- the country-specific embargo regulations.
From a company perspective, the processing times for export license applications are problematic. According to the VDMA, the backlog of applications from 2022 is still having an impact, leading to processing times of more than nine months in half of all cases. However, new regulations for the application process are intended to remedy the situation.
NEW GENERAL LICENSES FOR DUAL-USE GOODS
On September 1, 2023, new general licenses for dual-use goods came into force. This means that individual licenses are no longer required from BAFA for exports.
The regulations apply to exports to a number of countries, including South Korea, Singapore, Chile, Uruguay, Mexico and Argentina.
IMPORT OF MACHINERY IN THE COUNTRY OF DESTINATION
The obligations when registering an export – whether within the EU or to a non-European third country – are only one step towards successful machine transportation. The legal requirements that apply to imports in the country of destination must also be observed.
Accompanying documents and import duties
Foreign customs authorities often follow their own specifications, so exporting machine and plant manufacturers have to deal with the necessary accompanying documents. The spectrum of so-called consular and model regulations ranges from commercial invoices, certificates of origin and packing lists to international bills of lading and import licenses.
To provide a better overview, the European Commission has created a database in which all information on country-specific import tariffs and regulations is summarized. As a counterpart to Access2Markets, the World Trade Organization (WTO) has set up its own online portal. “Help Me Trade” is intended to contribute to greater transparency in international trade.
Accompanying documents and import duties
Due to the different preferential or free trade agreements that the EU has concluded with other countries, different regulations on duty reductions or exemption from duty must also be observed. These include, among others:
- the EU-United Kingdom Agreement (TCA),
- the EU-Vietnam Agreement (EUVFTA),
- the EU-Singapore Agreement (EUSFTA),
- the EU-Japan Agreement (JEFTA),
- the EU-Canada Agreement (CETA),
- the EU-Korea Agreement and
- EU-Turkey special features.
However, in order to benefit from reduced or waived import duties, the corresponding preference documents (e.g. EUR.1 or EUR.MED) must also be sent. This option is only available if certain product-specific manufacturing rules regarding the origin of the goods are fulfilled.
The supplier’s declaration is therefore a prerequisite for proof of preference. This contains all relevant information on the goods in question and their characteristics of origin. To this end, the manufacturing company must verify compliance with the prescribed rules of origin.
A certificate of origin may also be required. This is expected for imports to Arab countries or Russia, for example.
IMPORTANT INTERNATIONAL CONTRACTS FOR CROSS-BORDER MACHINERY TRANSPORTATION
Exporting machinery across borders is a complex process, and not just in terms of customs matters. It can also be complicated in terms of contract law if the contractual partners are based in different countries with different legal systems.
Cross-border international contracts are therefore the legal basis for foreign trade activities. Common contract types include purchase and supply contracts or industrial plant contracts. In order to ensure legal certainty for all contracting parties on the one hand and not to hinder international trade with legal issues on the other, there are various options for drawing up valid contracts.
ICC model contracts
The International Chamber of Commerce (ICC), for example, has had experts from the Commission on Commercial Law and Practice develop the so-called ICC model contracts. This provides companies of all sizes with a comprehensive tool, as the contracts cover various subject areas and can be used even if the company only has basic legal knowledge.
Incoterms® of the ICC
In addition to the model contracts, the ICC has created the internationally applicable Incoterms®. They also help to minimize legal complications between contracting parties.
The Incoterms® are uniform contractual and delivery conditions that can be used for the conclusion of a purchase contract. They allow standardized processing for both national and international trade transactions by precisely defining cost allocations, risk distributions and duties of care.
The current Incoterms® 2020 contain a total of eleven clauses:
| 1 | EXW | Ex Works |
| 2 | FCA | Free Carrier / Free Carrier |
| 3 | FAS | Free Alongside Ship / Free alongside ship |
| 4 | FOB | Free On Board / Free on board |
| 5 | CFR | Cost and Freight / Kosten und Fracht |
| 6 | CIF | Cost, Insurance and Freight |
| 7 | CPT | Carriage Paid To / Carriage Paid To |
| 8 | CIP | Carriage, Insurance Paid to / Carriage paid to insured |
| 9 | DAP | Delivered at Place / Delivered named place |
| 10 | DPU | Delivered at Place Unloaded / Delivered named place unloaded |
| 11 | DDP | Delivered Duty Paid / Delivered Duty Paid |
The clauses can be differentiated according to the types of transportation for which they are valid:
| Incoterms® clauses for all types of transportation | Incoterms® clauses for sea and inland waterway transport |
| EXW
FCA CPT CIP DAP DPU DDP |
FAS
FOB CFR CIF |
The Incoterms® naturally have their limitations. For one thing, they are not binding, so commercial contracts do not have to make use of the available clauses. Secondly, they do not replace the provisions of the sales contract or the underlying law that is decisive for the conclusion of a contract, transfer of ownership, payment processing or the legal consequences in the event of a breach of contract.
Nevertheless, there is no question that the clauses are an enormous relief when it comes to international business relations. Since non-EU markets overseas are also of great economic importance for European machine and plant manufacturers, the Incoterms® can therefore contribute to smooth machine exports.
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Image 2: Adobe Stock © AdKrieger
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