Starting this year, new rules apply to companies from Serbia that export raw materials and services to the German market. Those firms will have to prove they are not polluters and respect human rights, according to Germany’s new law on supply chains. The law does not apply to companies that export finished products, but only to suppliers for large German companies.
The export of raw materials, components, semi-finished products and services to the German market has been subject to a new, stricter regime since January 1. It includes all companies – domestic and foreign.
As partners and suppliers of German companies, they are obliged to prove that they respect human rights in production and that they do not pollute the environment.
“As for the protection of the rights of employees, it refers to the prohibition of the use of child labor, the prohibition of any forced labor, the abuse of private security, the right of employees to associate, the right of employees to adequate wages, adequate protection in the workplace, the prohibition against legal confiscation of land” , explains Tanja Lindel, assistant director of the Business Association Sector of the Serbian Chamber of Commerce.
When it comes to the second, environmental provision, the law relies on three conventions – on the use of mercury, the long-term impact of harmful substances and the transboundary movement of waste and its storage. What does all this mean in practice?
“Now you have to prove, in fact, that not only the production but also the transport of your goods is 100% green. This means that you can no longer use diesel trucks, so you have to transport the goods with a means of transport that is green. In the first place, it will to hit all those industries that cooperate with high-tech industries in Germany, which means the metal, electrical, mechanical industry, almost all branches of industry,” notes Dragoljub Rajić from the Business Support Network.
Pepper fines for not following the rules
The German Agency for Economic Policy and Affairs will control the application of the new rules in companies. They will further transfer part of the obligations to the suppliers from Serbia by contract. Those who do not respect them will be punished with heavy fines.
“High fines are foreseen for German companies, from 100, 200, 500, 800 thousand euros, to higher fines such as for companies with an annual turnover of over 400 million euros, even up to two percent of the annual turnover and a ban on participation in public tenders over three years. The very fact that a foreign company has been fined will result in the termination of our company’s contractual relationship, i.e. our companies are at risk of losing their partner if they do not comply with their obligations,” emphasizes Tanja Lindel.
This year, the law applies only to those German companies that employ more than 3,000 people. From the next, it will also apply to those with more than 1,000 employees. It is expected that a similar act on export will soon be adopted at the level of the entire European Union.
“Expensive but necessary changes”
Insiders indicate that the changes will be expensive, but necessary. For that, they say, they will need incentives from the state.
“In the example of a small company with up to fifty employees in the metal industry, these changes will cost five to ten million euros in the next three to five years. If they do not do it, their competition will decrease. Hungary, Croatia, Bulgaria, Romania, they are all in the EU and have these incentives, they will be more competitive in exports than our companies”, notes Dragoljub Rajić.
2,700 companies from Serbia export to Germany, and how many of them participate in supply chains – it has yet to be determined.
The Serbian Chamber of Commerce will open an assistance office in March, in order to make it easier for those companies to adapt to the new German rules.