As the fourth-largest economy in the world and the largest consumer market in the European Union—and with its geographic location at the center of the European Union—Germany is a marketplace power with growing importance to U.S. companies looking to build their European and worldwide expansion strategies. In this article, I’ll look at the history of U.S. trade with Germany; the process of exporting to Germany, including documentation and compliance requirements; and the benefits and considerations for U.S. companies looking to break into the German marketplace.
Trade and Exporting to Germany
After a 20th century marred by war and political strife, in the 21st century, Germany is a power player in Europe and the world. It is a “social market” economy that largely follows market principles but with a considerable degree of government regulation and wide-ranging social welfare programs.
Germany weathered the COVID-19 pandemic’s devastating economic effects in 2020 and 2021 better than any of its EU neighbors, but effects of the Russian invasion of Ukraine caused smaller than expected GDP growth in 2022; in addition to high energy prices due to Russia’s unprovoked war against Ukraine, demographic changes and resulting labor shortages lead economists to believe Germany’s economy may be stuck between recession, stagnation and slim growth for the next two to three years.
With a population of 84.3 million, Germany is the largest consumer market in the European Union, where every fourth job depends on exports. Germany is also the U.S.’s largest European trading partner and the sixth-largest market for U.S. exports, with exports totaling $76.7 billion in 2023, according to the Census Bureau.
Exporting to Germany: The Challenges
German policy poses relatively few formal barriers to U.S. trade or investment, apart from barriers associated with EU law and regulations, about which Germany has pressed the EU Commission to reduce. According to the Germany Country Commercial Guide, market challenges include the following:
- Germany’s acceptance of the EU’s Common Agricultural Policy and German restrictions on biotech agricultural products for U.S. products; this regulation is complex and may offer a degree of protection to established local suppliers.
- Germany’s rigorous application of safety and environmental standards can lead to increased bureaucratic efforts and complicate access to the market for U.S. products. U.S. companies interested in exporting to Germany should know which standards apply to their product and obtain timely testing and certification.
- Compliance with German standards is especially relevant to U.S. exporters, as EU-wide standards are often based on existing German standards.
- Germany has a relatively higher cost of doing business.
While U.S. exporters must be aware of these barriers when exporting to Germany, with careful planning and assistance from agencies like the U.S. Commercial Service, exporters of all sizes can absolutely be successful in the German market.
Exporting to Germany: The Opportunities
In almost all situations, the potential rewards of exporting to Germany outweigh any challenges exporters may face. Exporters should identify and cultivate business opportunities while building a strategy to minimize the risks. According to the State Department, Germany is consistently ranked as one of the most attractive investment destinations based on its stable legal environment, reliable infrastructure, highly skilled workforce, and world-class research and development.
Exporters to Germany can count on high levels of productivity, a highly skilled labor force, quality engineering, good infrastructure and a location in the center of Europe. The ITA projects Germany will be a leading market for clean technology export success in the immediate future. Additionally, the following are prioritized sectors with high export potential:
- Cybersecurity
- ICT/software
- Digital services
- Consulting services
- IOT/AI
- Green technologies
- Smart/safer cities
- Smart energy/renewables/storage
- Healthcare/medical devices, digital health solutions, and safety/security technologies
Export Assistance
The best thing about exploring the opportunities to export to Germany is knowing you don’t need to go it alone. You can rely on assistance from your in-country allies, including the U.S. Commercial Service office, trade missions and chambers of commerce.
U.S. Commercial Service Offices
One of the first places to consider are your local and in-country U.S. Commercial Service offices. The Commercial Service in-country offices offer U.S. exporters business partners in Germany—boots on the ground in the country—and include representation by an agent, distributors or partners who can provide essential local knowledge and contacts that can be critical for your success. You can learn more about in-country offices in our article, Tapping into the U.S. Commercial Service’s In-Country Offices.
District Export Councils (DECs)
DECs across the country can help exporters by supporting trade and services that strengthen individual companies, stimulate U.S. economic growth and create jobs. DEC members also serve as mentors to new exporters and can provide advice to smaller companies.
Sponsored by state and local trade offices as well as commercial service offices, trade missions are a great way to get introduced to and network with contacts. Check into them.
International Trade Administration (ITA)
The ITA is an excellent resource to help you combat trade problems. ITA staff are resident experts in advocating for U.S. businesses of all sizes. They customize their services to help solve your trade dilemmas as efficiently as possible. The ITA makes it easy to report a problem, allowing you to submit your report online.
Chambers of Commerce
Chambers of commerce may be a resource when exporting to Germany. You can learn more about various chambers and how they can help smooth the way for your export activities in our article, The Chamber of Commerce Role in Exporting.
Export Document Requirements for Germany
Export documentation and attention to procedures are as critical in exporting to Germany as they are for exporting to any other country. An import license is not needed to import the majority of industrial goods into the EU; however, some industrial goods require import licenses issued by the Import Licensing Branch (ILB) as a result of controls imposed at national, EU and United Nations levels. Documents you need to export to Germany (and the European Union) from the U.S. will vary depending on your products, but may include:
Export Compliance Issues When Exporting to Germany
It’s important to understand the regulations covering exports to Germany, especially export controls.
Product Classification for Export Controls
The first step in ensuring export compliance is determining who has jurisdiction over your goods: the U.S. Department of Commerce under the Export Administration Regulations (EAR) or the State Department’s International Traffic in Arms Regulations (ITAR).
If your goods fall under the jurisdiction of the Commerce Department, which most products do, you must determine if your export requires authorization from the Bureau of Industry and Security (BIS, part of the Commerce Department). To do so you need to answer the following questions:
- What is the Export Control Classification Number (ECCN) of the item?
- Where is it going?
- Who is the end user?
- What is the end use?
There are three ways to classify your products for export controls: You can self-classify your products, submit a SNAP-R request for a ruling or rely on the product vendor to provide the information. You can learn about that process in our article, Export Codes: ECCN vs. HS, HTS and Schedule B.
By classifying your product correctly, you’ll be protecting yourself from potential fines, penalties and even jail time.
Export License Determination
Next, companies must use the ECCN codes and reasons for control described above to determine whether or not there are any restrictions for exporting their products to specific countries. Once they know why their products are controlled, exporters should refer to the Commerce Country Chart in the EAR to determine if a license is required.
Although a relatively small percentage of all U.S. exports and re-exports require a BIS license, virtually all exports and many re-exports to embargoed destinations and countries designated as supporting terrorist activities require a license. Countries fitting that bill are Cuba, Iran, North Korea and Syria. Part 746 of the EAR describes embargoed destinations and refers to certain additional controls imposed by the Office of Foreign Assets Control (OFAC) of the Treasury Department.
The Shipping Solutions Professional export documentation and compliance software includes an Export Compliance Module that uses the ECCN code for your product(s) and the destination country to tell you if an export license is required. If indicated, you must apply to BIS for an export license through the online Simplified Network Application Process Redesign (SNAP-R) before you can export your products.
There are export license exceptions, like low-value or temporary exports, that allow you to export or reexport, under stated conditions, items subject to the Export Administration Regulations (EAR) that would otherwise require a license. These license exceptions cover items that fall under the jurisdiction of the Department of Commerce, not items controlled by the State Department or some other agency.
Deemed Exports
Surprise! You may be an exporter without even knowing it! Deemed exports, or the disclosure of information or services rather than an actual product, is an important issue to pay attention to when exporting. A deemed export occurs when technology or source code (except encryption and object source code, which is separately addressed in the EAR under 734.2(b)(9)), is released to a foreign national within the United States.
Sharing technology, reviewing blueprints, conducting tours of facilities and other information disclosures are considered potential exports under the deemed export rule and should be handled accordingly. You can learn how to apply this principle here.
Restricted Party Screenings
Restricted party lists (also called denied party lists) are lists of organizations, companies or individuals that various U.S. agencies—and other foreign governments—have identified as parties that one can’t do business with.
There are several reasons why a person or company may be added to a restricted party list. For example, they may be a terrorist organization or affiliated with such an organization, they may have a history of corrupt business practices, or they may otherwise pose a threat to national security.
Restricted party screening (or denied party screening) refers to the process in which a company checks a potential customer or business partner against one or more of the restricted party lists to ensure they are not doing business with a restricted party.
The primary restricted party lists in the United States are published by the Department of Commerce, Department of State, and Department of Treasury. However, several other agencies produce lists as well. These agencies recommend that companies perform restricted party screening periodically and repeatedly throughout the movement of goods in the supply chain.
When exporting to Germany, it’s imperative you check every single restricted party list every time you export.
- Fines for export violations can reach up to $1 million per violation in criminal cases (Bureau of Industry and Security).
- Administrative cases can result in a penalty amounting to $250,000 or twice the value of the transaction, whichever is greater.
- Criminal violators may be sentenced to prison for up to 20 years, and administrative penalties may include denial of export privileges.
Export Documentation and Compliance Software
If you’re considering exporting to Germany, Shipping Solutions export documentation software can help you quickly create the necessary documents and stay compliant with export regulations. Register for a free demo of the Shipping Solutions software to see how it can revolutionize the way you’re currently creating your export paperwork.
This is one in a series of articles exploring exporting to specific countries across the globe—we previously featured exporting to China, the United Kingdom, Japan, Mexico, Canada and India.
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