When exporting goods from the Netherlands to countries inside and outside the European Union (EU), national and international rules, legislation, export controls and customs formalities apply. This is something you may have to deal with as an entrepreneur. But what exactly are export restrictions, to whom do they apply and why is it important to be aware of them and to act accordingly? That is explained in this blog series.

The intention of the blog series is to inform you as an entrepreneur about the reasons and the necessity for awareness of possible export restrictions and the prevention of problems in your company when acting contrary to these restrictions. An effective compliance protocol can help.

In our previous blog, we explained what is meant by export restrictions. This second part of our blog series explains the consequences of acting in breach of applicable export restrictions. In the third part, we will consider the legal consequences of transgression. This will be followed by a focus on the companies subject to these restrictions. In the fourth part, the usefulness and necessity of export compliance will be explained, and finally, we will examine the specific contents of an effective export compliance protocol.

Introduction

A company is obliged to comply with export restrictions. As explained in the first blog series, there is a great deal of legislation that must be complied with. If a company exports, imports or transits goods or services in violation of the restrictions, the company may face sanctions. The consequences of not meeting the requirements within this framework are far-reaching and are set out below.

Acting in breach of licensing requirement

An export licence is required to export certain goods. This applies to strategic goods and services. The goods subject to a licensing requirement are listed in, for instance, Regulation (EC) No. 428/2009. The enforcement of provisions in Regulation (EC) No. 428/2009 is left to the various Member States within the EU. In the Netherlands, the sanction provisions are contained in the Dutch Strategic Goods and Services Act (Wet strategische goederen en diensten), the Dutch Strategic Goods Decree (Besluit strategische goederen) and the Dutch Economic Offences Act (Wet op de economische delicten). Transgressions are an economic offence and are punishable by law. The judgment of an economic offence takes place within criminal law. This is considered a crime if the offences are committed intentionally. This crime is punishable by up to six years’ imprisonment, a community punishment order or a fifth category fine. If there is no intention, the economic offence qualifies as a violation. The maximum penalty for the violation is one year’s imprisonment, a community punishment order or a fourth category fine.

Acting in breach of sanctions regimes

Sanctions are political instruments in the foreign and security policy of the United Nations and the European Union. They are mandatory, non-military instruments that are used in response to infringements of international law or regimes that do not respect the principles of the rule of law and democracy, in an attempt to bring about a change. The most common sanctions are arms embargoes, trade restrictions, financial sanctions (freezing of assets) and travel and visa restrictions. These sanctions may therefore be applied against a country or against certain persons or organisations in a country. It is therefore theoretically conceivable that there is no restriction on the product or service being exported, but that there is a restriction regarding the end user or final destination. In that case, as an organisation, you are not at liberty to supply either. A prohibition from one of the many sanction regimes takes precedence over the license requirement in Regulation (EC) No. 428/2009.

Dutch Sanctions Act 1977

In the Netherlands, the sanctions provisions are included in the Dutch Sanctions Act 1977 (Sanctiewet 1977). The Dutch Sanctions Act 1977 provides a basis for the creation of national rules to implement international sanctions measures. Sanctions at European level are laid down in council decisions and/or European regulations. In addition, sanctions are also adopted by the United Nations (UN). These sanctions are laid down in a resolution of the UN Security Council.

Acting contrary to the provisions of the Dutch Sanctions Act 1977 qualifies as an economic offence. In the Dutch Economic Offences Act (Wet op de Economische delicten), acting contrary to the Dutch Sanctions Act is considered a violation if the act is committed without intent. Acting contrary to these provisions may qualify as a crime, if intent is involved. This crime is punishable by up to six years’ imprisonment, a community punishment order or a fifth category fine. If there is no intention, the economic offence qualifies as a violation. The maximum penalty for the violation is one year’s imprisonment, a community punishment order or a fourth category fine.

Collateral damage and reputational damage

The economic offence in itself causes damage to the company. In addition to economic damage, it is also conceivable that collateral damage occurs, e.g. damage to the company’s reputation. Trading without licences or with sanctioned countries may result in media coverage, with all the consequences this entails. The serious repercussions are evidence by the ruling of the Limburg District Court of 18 February 2019. A director and (indirect) shareholders were sentenced to fines and prison terms for exporting gas turbines to Iran without a licence.

In conclusion

This shows that the consequences of violating export restrictions can be serious. Not only from a criminal law perspective, but certainly also in terms of economic consequences. Acting contrary to the applicable export legislation can therefore cause a lot of damage to your company. This demonstrates the importance of complying with export restrictions. Therefore, screening and classification of products, the end use and the buyer are very important. We will tell you more about this in blogs 4 and 5.