Smuggling, Ban-Breach and Customs Evasion in Germany

German customs criminal law can be understood as a special offence area of criminal tax law, which is why it can also be referred to as “special criminal tax law”. Such customs offences are distinguished from less severe customs offences, such as tax jeopardy under Section 380 AO or reckless tax evasion under Section 378 AO. However, fines can also be imposed for customs offences. Sections 30 and 130 of the German Act on Regulatory Offences (OWiG), for example, open up the possibility of sanctioning a company with a fine of up to ten million euros in the event of an intentional infringement unless the violated provision provides a different maximum limit.

Customs offences are defined as tax offences in Germany following Section 369 (1) no. 1 AO. Therefore, the provision for tax evasion (Section 370 AO) is relevant for customs evasion. In addition, the German Fiscal Code provides for further specific customs offences, of which ban-breach (Section 372 AO), smuggling (Section 373 AO) and tax evasion (Section 374 AO) are of particular legal significance in Germany.

On the other hand, customs duties and the requirements associated with the transfer of goods are governed by EU law, namely the Union Customs Code (UCC for short, by Regulation [EU] 952/2013). Overlaps with other offences are often possible, in particular with German criminal law on narcotics and pharmaceuticals, if, for example, anabolic steroids or other drugs or narcotics are purchased abroad, imported into Germany and discovered by customs when crossing the border.

In the case of private individuals, travel smuggling, failure to declare cash and irregularities in the handling of excisable goods – particularly “misuse” – are of particular importance. In the case of commercially active companies, the focus is on commercial smuggling (Section 373 AO) and customs evasion (Section 370 AO). In addition, problems can arise that can result in severe economic losses, for example, if an entire shipping container is confiscated during a customs inspection but only some of the goods have not been adequately declared or if intellectual property rights are infringed.

The public prosecutor’s office in Germany is rarely involved in criminal customs matters, as special investigative authorities have been set up for this purpose. These authorities include the German Customs Criminal Office based in Cologne, the German Customs Investigation Offices and a total of 41 main customs offices. The respective responsibilities arise from various laws. The Main Customs Offices and the Customs Investigation Offices in Germany carry out criminal investigations. These authorities have the same legal powers as the public prosecutor’s office. Of particular importance are searches of business premises and companies by the customs investigation office, Section 102 of the German Code of Criminal Procedure (StPO). In addition, the customs investigation office is authorised to inspect and seize documents relevant to German customs law following Section 404 AO.

In Germany, the criminal penalties in customs proceedings are often significantly higher than in simple criminal tax proceedings. Furthermore, the possible secondary consequences should not be underestimated. For example, a criminal tax conviction can considerably impact customs authorisations and permits, as these are regularly dependent on personal conditions influenced by a conviction. The authorities may also threaten further professional or disciplinary consequences depending on the convicted person’s affiliation with a certain professional group.

According to Article 5 No. 20 and 21 of the Union Customs Code, import and export duties are considered “taxes” within the meaning of Section 3 (3) AO. Consequently, customs evasion falls under the offence of tax evasion by Section 370 AO, paragraph 1 of which regulates the following:

A penalty of up to five years’ imprisonment or a monetary fine shall be imposed on any person who

1. furnishes the revenue authorities or other authorities with incorrect or incomplete particulars concerning matters that are relevant for tax purposes,

2. fails to inform the revenue authorities of facts that are relevant for tax purposes when obliged to do so, or

3. fails to use revenue stamps or revenue stamping machines when obliged to do so

and as a result understates taxes or derives unwarranted tax advantages for himself or for another person.

The offence can be committed in various ways, whether by actively providing false or incomplete data or by refusing to pass on relevant information to the customs authorities – in each case, with the intention of obtaining unjustified customs advantages. These may consist, for example, of understated customs duties or unauthorised concessions. In contrast to fraud, the intention to enrich oneself is not necessary.

In Germany, tax-relevant facts include all information decisive for assessing the duties or the resulting claim in terms of reason and amount. The false statements (or the concealment of mandatory information) must have been made to a tax authority in Germany or another authority responsible for customs matters, such as the main customs office. Communication with private individuals or companies does not fulfil the necessary criteria.

Section 372 of the German Customs Code (AO) sets out the legal framework for breaches of German customs law. It provides information on the legal aspects of importing, exporting, and transporting goods in violation of prohibitions. Anyone who disregards a prohibition and brings goods across the German customs border is liable to prosecution. Such bans are common and serve various economic and non-economic purposes. They are issued by laws, ordinances, or directly applicable regulations of the European Union, whereby restrictions can also constitute bans in individual cases. Examples are the general ban on importing potatoes in tourist traffic due to the risk of spreading bacterial ring rot and the unrestricted import of edible mushrooms for personal use up to two kilograms.

The bans extend to food and animal feed and cultural goods, textiles, animals and plants, weapons, medicines, anaesthetics, raw diamonds, and much more. Given the scope and variety of these regulations, informing yourself of any restrictions before importing or exporting goods is advisable to avoid possible fines or criminal proceedings.

Under German law, smuggling denotes the illicit movement of goods across the EU customs border, evading official border customs offices. This transgression breaches existing customs regulations, imposing specific duties on responsible individuals.

These duties encompass the submission of an entry summary declaration (Art. 127-132 UC). This declaration, mandatory before goods enter the EU customs territory, facilitates early risk analysis by customs authorities for protection and security purposes. Basic information, including goods description and identification number, is requisite. Alternatively, a customs declaration may be submitted, subject to approval by the customs office of entry, within the same timeframe and containing essential particulars.

Moreover, adherence to transportation obligations outlined in Art. 135 (1) of the Union Customs Code is crucial. Imported goods must be promptly transported to the designated customs office post-border crossing, utilising authorised transport routes stipulated by national law. Upon arrival, immediate presentation to customs authorities is mandatory (Art. 139 (1) UCC), with goods remaining at the presentation site until clearance is granted (Art. 139 (7) UCC).

Time restrictions must also be observed. Goods transported via customs routes may only enter or exit the European Union customs territory during competent customs office operating hours (Section 3 (1) German Customs Administration Act, ZollVG). Failure to comply may result in (commercial) smuggling, such as unauthorised departure from designated routes or inability to present goods at the customs office upon arrival. Additionally, improper declaration of dutiable goods poses criminal liability risks. These obligations represent only a fraction of duties involved in cross-border goods movement within European Union customs borders. Neglecting any obligation heightens the risk of oversight, potentially leading to tax advantages and subsequent criminal investigation.

The term smuggling generally refers to the unlawful transporting of goods across the border without a proper customs declaration. However, this only covers simple tax or customs evasion.

From a legal point of view, smuggling is an aggravated offence compared to tax/customs evasion and the violation of prohibitions. Section 373 para. 1 AO stipulates:

Whoever evades import or export duties on a commercial basis or who illegally imports, exports or transports goods on a commercial basis in contravention of monopoly regulations shall be subject to imprisonment for a period of six months to 10 years. In less serious cases, the penalty shall be imprisonment for up to five years or a monetary fine.

The commercial nature of the offence aggravates the penalty. The penalty is further aggravated under Section 373 (2) AO if weapons or dangerous instruments are used in tax evasion or criminal activities or if a gang commits the offences.

According to the case law of the German Federal Court of Justice (BGH), a person acts commercially if their actions indicate the intention to generate continuous income over a longer period of time through the repeated commission of criminal offences for personal gain. Even a single offence can be sufficient if the circumstances indicate a risk of repetition. For example, the construction of hiding places, such as containers, in a vehicle signals considerable effort and indicates an intention to repeat the offence. The establishment of a dummy company can also indicate such an intention.

Intelligence smuggling in Germany diverges from the physical transportation of goods, focusing instead on providing inaccurate or incomplete statements and submitting forged documents. This deceptive information distorts the basis for duty assessment, resulting in unjustified customs benefits.

Critical elements of the assessment basis include the type of goods, quantity, customs value, and duty rate. Under-invoicing is among the most prevalent practices, where the declared customs value is deliberately understated. The lower the declared value, the lower the assessed duties, leading to unwarranted tax advantages. Often, invoices are falsified to reflect lower purchase prices, influencing customs value determination. Furthermore, misrepresenting the nature of goods leads to incorrect customs tariff classification, resulting in erroneous duty calculation. However, the objective of mislabelling extends beyond tax savings, aiming to circumvent import bans or restrictions. For instance, meat might be mislabelled as permissible deer meat when, in fact, it’s prohibited reindeer meat to facilitate entry into Germany.

Intelligence smuggling frequently entails additional fraudulent activities and offences, especially when falsified evidence is necessary for preferential measures. Preferential measures grant favourable treatment under German customs law, such as reduced or duty-free treatment for goods from specific countries or territories. Proof of origin is required to qualify, often falsified or obtained through illicit means like deception or corruption.

Travel smuggling in Germany entails the evasion of import duties on transported goods carried within personal luggage during travel. The nature of the journey is immaterial; however, the goods transported are typically intended for personal use rather than commercial purposes. If the primary purpose is indeed personal use, it falls under the legal realm of “simple” customs evasion during travel. Conversely, if the underlying objective is commercial, it may fulfil the aggravating element of commercial smuggling in the legal sense. The existence of any exemption limits, restrictions, or prohibitions is crucial to assess, as the possibility of private use offers advantages absent in commercial importation scenarios, warranting scrutiny in cases of doubt.

Therefore, declaration obligations, import restrictions, and import turnover taxes—considered relevant customs duties—must be adhered to during travel. A typical scenario involves individuals transporting goods subject to declaration and duties across the customs border via aircraft and subsequently exiting the airport through the “green exit,” falsely asserting that no dutiable goods were carried in their luggage, thus committing evasion.

In addition to cash and valuables such as expensive jewellery, the transfer of tobacco products, coffee, alcohol, medicines and other narcotics and intoxicants is particularly relevant in practice in Germany. Given the large number of travellers, the global networks and the developing control measures, a considerable number of unreported cases of travel-related customs evasion can be assumed, leading to considerable tax losses every year. Our German lawyers will be happy to explain how you should proceed in the event of such an allegation. Our German customs law and foreign trade law experts have in-depth expertise in the field of import and export and many years of experience dealing with customs authorities. We will be happy to advise you. Contact us today to find out more about our services in this context.

Person A travels by plane from Dubai (UAE) back to Germany and carries two valuable pieces of gold jewellery with a total value of EUR 100,000. The exemption limit for air travel is EUR 430, so this is far exceeded, and there is a duty to declare and pay duty. The customs duty comprises the customs amount and the import turnover tax. The customs amount is the respective customs value multiplied by the customs rate. The customs rate depends on the customs tariff, which depends on the goods (in this case, gold jewellery, a precious metal).

In this specific case, the customs value is EUR 100,00, which must be multiplied by the customs rate and amount to 4.5% for precious metal jewellery, but at least EUR 0.30 per piece and at most EUR 0.80 per piece. Multiplying the customs value by 4.5% results for EUR 4,500, which thus far exceeds the maximum limit. This multiplication is because Person A is carrying two pieces of jewellery, so that the maximum value for both is EUR 1.60 in total. The amount of duty is, therefore, EUR 1.60. Added to this is the import turnover tax, which is calculated similarly, namely the import turnover tax value multiplied by the import turnover tax rate. The import VAT value is calculated from the customs value and the customs amount; in this case, EUR 100,001.60. The current tax rate is 19% so that the total import VAT is EUR 19,000.30. If the customs amount of EUR 1.60 is added to the import turnover tax, Person A would have to pay the whole customs duty of EUR 19,001.90. On the other hand, Person A passes through the country without making a declaration and payment, and they would have to pay the customs duty. If, on the other hand, they pass the “green exit” without declaring and paying, they are liable to prosecution for customs evasion.

In addition to expensive jewellery, other valuables and cash, the transfer to tobacco products, coffee, alcohol, medicines and other narcotics and intoxicants are of great practical importance. However, other goods, such as solar panels manufactured in China, are currently also popular smuggled goods. The focus here is that goods manufactured in China would generally have to pay customs duties (especially anti-dumping and countervailing duties). To save these costs, the goods are first shipped to other countries from which these duties do not apply and then brought into the EU from there. In doing so, the other country, which is not China, is (falsely) declared as the manufacturing country to save the customs duties. Another popular business model in this context is the payment of subsequent refunds (kick-back payments) between the importer and the customer.