Smuggling, Ban-Breach and Customs Evasion in Germany

Under Article 5, numbers 20 and 21 of the Union Customs Code, import and export duties are considered “taxes” as per § 3, paragraph 3 of the German Fiscal Code (AO). Consequently, customs evasion falls under the category of tax evasion as per § 370 AO. Paragraph 1 outlines the following:

Any individual who:

• Provides incorrect or incomplete information to revenue authorities or other relevant authorities regarding tax-related matters.
• Fails to disclose relevant tax-related facts when obligated to do so.
• Neglects to utilise revenue stamps or stamping machines when required, resulting in understated taxes or unwarranted tax advantages, may face penalties of up to five years’ imprisonment or a monetary fine.

The offence can manifest in three ways: through the active provision of false or incomplete data (1) and failure to disclose relevant information to customs authorities (2 and 3), all executed with the intent to gain unjustified customs advantages. Unlike fraud, the intention to enrich oneself is not mandatory. This unjust advantage could manifest in various forms, such as underestimated customs duties or concessions.

“Facts relevant for tax purposes” encompass any information crucial for assessing duty or the arising claim in terms of reason and amount calculation. Such statements or concealments must be directed toward a tax authority or other relevant authority, such as the main customs office in customs matters. Communication with private individuals or companies does not meet the necessary criteria.

§ 372 AO outlines the legal framework governing breaches of bans within German customs law and provides information regarding the legal aspects of the importation, exportation, and transportation of goods in defiance of prohibitions.

“(1) Any individual who imports, exports, or transports goods in defiance of a prohibition is considered to have engaged in illegal importation, exportation, or transportation of goods.

(2) The perpetrator shall face penalties under section 370(1) and (2) if the act is not already punishable by a fine or criminal prosecution for violating import, export, or transit prohibitions under other legal provisions.”

This provision is straightforward: anyone disregarding a prohibition and moving goods across the German customs border is subject to legal action. Such prohibitions are standard and serve diverse economic and non-economic purposes. These prohibitions are enacted through laws, statutory instruments, or directly applicable European Union regulations, with restrictions sometimes constituting prohibitions in specific cases.

Examples include a general ban on importing potatoes in tourist traffic due to the risk of bacterial ring rot spread, contrasting with the unrestricted import of edible mushrooms for personal use up to two kilograms (quantitative limit).

Prohibitions extend beyond food and feed to cultural goods, textiles, animals and plants, weapons, medicines, narcotics, rough diamonds, and more. Given the breadth and diversity of these regulations, it’s prudent to ascertain any limitations before importing or exporting goods, potentially averting fines or criminal proceedings.

If the prohibition carries its own punishment, which is typical, it takes effect. Otherwise, paragraph 2 applies, referencing penalties for tax evasion. Both offences may be committed and punished concurrently if tax or customs duties are evaded alongside prohibited importation or exportation.

Smuggling under German law 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) CCC), with goods remaining at the presentation site until clearance is granted (Art. 139 (7) CCC).

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) Customs Administration Act). 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.

Under § 371 AO, it is possible to file a “penalty-exempt voluntary disclosure”. This is a personal ground for exemption from punishment. If the requirements are met, this leads to exemption from punishment. However, this possibility only exists regarding simple tax or customs evasion according to § 370 AO, but not about the more severe offence of (commercial) smuggling. Nor is it applicable to the breach of the ban under § 372 AO.

As previously highlighted, smuggling constitutes an aggravated offence compared to tax/customs evasion and breach of ban. § 373 (1) AO specifies:

“(1) Individuals evading import or export duties on a commercial basis or illegally importing, exporting, or transporting goods commercially in contravention of monopoly regulations face imprisonment ranging from six months to 10 years.”

The severity of the penalty escalates due to the commercial nature of the offence. Additionally, aggravation occurs under paragraph 2 when weapons or dangerous tools are involved in tax evasion or criminal activities (1, 2) or when offences are perpetrated by a gang (3). However, this article focuses on the primary offence variants.

In colloquial usage, “smuggling” typically refers to the unlawful transportation of goods across borders without proper customs declaration. Legally, smuggling entails an additional aggravating factor. Three common forms of smuggling include classical, intelligence, and travel smuggling. Colloquial “smuggling” often refers to “simple” tax or customs evasion.

At Schlun & Elseven Rechtsanwälte, we offer dedicated support to individuals facing allegations or charges related to commercial smuggling offences, ensuring robust defence strategies tailored to each client’s unique circumstances.

• Legal Expertise: Our team of seasoned legal professionals possesses a deep understanding of German customs law and regulations, enabling us to provide authoritative counsel on matters about commercial smuggling. We thoroughly analyse each case, identifying critical legal intricacies and crafting effective defence strategies to mitigate potential consequences.
• Tailored Defence Strategies: At Schlun & Elseven Rechtsanwälte, we recognise that every case is unique, and leveraging our extensive experience and legal acumen, we tailor defence strategies to align with the specific nuances of each client’s situation. Whether advocating for mitigated penalties, negotiating plea agreements, or mounting vigorous courtroom defences, we prioritise our clients’ best interests at every stage of the legal process.
• Comprehensive Legal Support: From the initial consultation to resolution, Schlun & Elseven Rechtsanwälte provides comprehensive legal support to individuals entangled in allegations of commercial smuggling. We deal with complex legal procedures, liaise with relevant authorities, and advocate tirelessly on behalf of our clients, striving to achieve the most favourable outcomes possible.
• Client-Centered Approach: Our practice’s core is a commitment to client satisfaction and advocacy. We prioritise open communication, ensuring our clients are informed and empowered throughout the legal proceedings. Our team remains accessible, responsive, and dedicated to addressing clients’ concerns and questions promptly and comprehensively.

In line with established case law from the Federal Court of Justice (BGH), an individual is deemed to act commercially if their actions demonstrate an intent to derive continuous income over a sustained period by repeatedly engaging in offences for personal gain. Even a single act may suffice if circumstances indicate a likelihood of repetition. For instance, the construction of concealment compartments, such as containers, within a vehicle signals significant effort and implies an intent to repeat. Similarly, the creation of a dummy company may suggest such intent.

Under § 1 (1) sentence 3 of the Customs Administration Act, relevant import and export duties encompass not only those stipulated by the Union Customs Code (Art. 3, nos. 20 and 21) but also include import turnover tax and other excise duties applicable to imported goods. Currently, no export duties or customs duties exist within the Customs Union (cf. Art. 28 (1), 30 TFEU).

Furthermore, engaging in an offence by commercially violating monopoly regulations holds no significance, as there are presently no monopoly regulations in force.

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 goods’ nature, 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 goods’ nature leads to incorrect customs tariff classification, resulting in erroneous duty calculation. However, the objective of mislabeling extends beyond tax savings, aiming to circumvent import bans or restrictions. For instance, meat might be mislabeled as permissible deer meat when, in fact, it’s prohibited reindeer meat to facilitate entry into the country.

Intelligence smuggling frequently entails additional fraudulent activities and offences, especially when falsified evidence is necessary for preferential measures. Preferential measures grant favourable treatment under 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, typically, the goods transported are 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 in nature, it may fulfill 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 as relevant customs duties—must be adhered to during travel. A common 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.

Given the vast number of travelers, global networks, and evolving control measures, a significant number of unreported cases in travel-related customs evasion are presumed, leading to substantial tax losses annually. To illustrate, consider the following example:

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.