German Supply Chain Due Diligence Act: Authority publishes questionnaire on reporting obligations

The new German Supply Chain Due Diligence Act (“Supply Chain Act”, “Act”) will enter into force in January 2023, and many German and foreign in-scope companies have been (and still are) preparing intensively and with a lot of effort for the new, far-reaching due diligence obligations (read more here). The Act leads to practical challenges and many of its provisions leave considerable room for interpretation. In-scope companies have therefore been eagerly awaiting guidance from the competent enforcement authority, the Federal Office for Economic Affairs and Export Control (BAFA). After FAQs (available in English here) and first guidelines on risk analyses as part of the companies’ risk management duties (read more here), BAFA has now published the questionnaire with whose submission companies will comply with their reporting obligations imposed under section 10 para. 2 of the Supply Chain Act (available in German here, the BAFA is currently working on translations). Based on the questionnaire, the answers are automatically used to create a report that can then be submitted to BAFA.

Background to the reporting obligation

The Supply Chain Act requires all in-scope companies to annually publish a report on their compliance with the Act’s due diligence requirements. Companies must submit this report to BAFA (and make it publicly available free of charge on the company’s website) no later than four months after the fiscal year’s end. The reports must be publicly available for a period of seven years. BAFA examines the submitted reports and may demand subsequent improvements and impose fines. Starting in January 2023, an electronic portal for the reports will be available at the BAFA. According to BAFA, more detailed information will be made available soon.

The questionnaire

The questionnaire contains both mandatory questions and questions that may be answered on a voluntary basis. The questions are open, closed or multiple choice. On a positive note, the questionnaire includes a glossary defining specific terms used in the questions.

Companies fulfil their reporting obligation under the Act by answering the questionnaire completely and truthfully and publishing the report generated from it on the company's website. Against this background, the questionnaire concerns the following aspects:

• Whether and, if so, which human rights and environmental risks or violations of a due diligence obligation the company has identified.
• What the company has done with respect to its duties under the Act.
• How the company evaluates the measures’ impact and effectiveness.
• What conclusions the company draws from the evaluation for future measures.

Exemptions from the reporting obligation

Yet, the questionnaire’s preamble clarifies that the company is not obliged to divulge trade and business secrets in the report and may thus omit such information. On the other side, BAFA points out that an important aspect of whether a company will be examined more intensively will be the plausibility of the submitted report.

The preamble further states that the company may refuse to answer questions if the answer would expose oneself or one of the relatives referred to in Section 52 (1) of the Code of Criminal Procedure (Strafprozessordnung) to the risk of criminal prosecution or proceedings under the Administrative Offences Act (Ordnungswidrigkeitengesetz). If due to this reason only limited information is provided in the report with respect to mandatory questions the possibility exists to confirm this via a checkbox when submitting the report. Following this explicit confirmation, the report can be submitted even if the mandatory information is missing. It is expected that companies will face many challenges and legal questions in this regard.

What’s next?

For the affected companies the questionnaire’s publication is another step towards more clarity concerning the Supply Chain Act’s implementation into practice. The questionnaire allows them to check whether they are sufficiently prepared to fulfil the new obligations, in particular, to what extent they already have all the necessary information at hand or whether further preparatory measures are required. Nonetheless, many questions remain. Also, companies are awaiting the BAFA’s publication of further guidelines it is currently working on (regarding, inter alia, the principle of proportionality and complaint procedures). Watch this space!