Annual report pursuant to Section 10(2) German Supply Chain Due Diligence Act – BAFA questionnaire to facilitate report drafting
Reporting obligation pursuant to Section 10(2) Supply Chain Due Diligence Act
Effective January 1, 2023, it is mandated that all entities falling within the purview of the Supply Chain Due Diligence Act will be obligated to draw up an annual report pertaining to the discharge of their due diligence responsibilities under the Supply Chain Due Diligence Act during the preceding fiscal year, and subsequently make said report publicly available on their website. The reporting obligation, as stipulated in Section 10(2) Supply Chain Due Diligence Act, represents a fundamental and indispensable duty within the framework of the legislation. In addition, it is imperative that the company consistently maintains comprehensive documentation to substantiate the diligent fulfillment of its due diligence obligations.
The generation of the report pertaining to the satisfaction of due diligence responsibilities occurs through an online platform, wherein the companies at issue are required to input their responses into a designated electronic questionnaire. Subsequently, said report must be duly presented to the appropriate regulatory body, the Federal Office for Economic Affairs and Export Control (“BAFA”), within a maximum period of four months subsequent to the conclusion of the fiscal year. To streamline the process of report submission, BAFA has announced its intention to provide an online input mask, essential for this purpose, commencing in the spring of 2023. This digital tool will enable the efficient input of responses to the questionnaire.
BAFA questionnaire for reporting
The question catalog for reporting was published by BAFA on October 14, 2022. By utilizing the catalog, consisting of 437 multiple-choice questions, corporations are able to autonomously assess their adherence to reporting obligations, which are to become effective as of January 1, 2023. The catalog serves as a valuable means to verifyand assess the extent to which companies have met their due diligence obligations.
The questionnaire has been designed to “translate” the statutory provisions of the Supply Chain Due Diligence Act by presenting them in a comprehensible format through a series of questions. BAFA does not anticipate that any information in excess of the prescribed legal obligations will be required.
The questionnaire encompasses queries that pertain to both obligatory reporting matters and queries that may be addressed at the discretion of the respondent. In the event that questions ask for responses in a voluntary manner, this is clearly marked within the questionnaire. Abstaining from providing responses to such queries does not bear any adverse consequences for the company. BAFA explicitly acknowledges that the provision of voluntary information may yield favorable outcomes, as it facilitates a streamlined assessment process by BAFA, potentially resulting in a risk-based audit without the need for additional evidentiary requests.
The questionnaire formulated by BAFA is predicated upon the legal principle of the “obligation to make an effort” as prescribed by the law. The aforementioned provision entails the inclusion of ongoing processes, company-specific structures, and content derived from extant reports and documentation through the use of free text fields. Plausible explanations are duly considered and accorded appropriate weight in the BAFA review. Pursuant to the consideration of various entrepreneurial circumstances, particularly during the initial year of reporting, divergent corporate realities are acknowledged. Simultaneously, it appears that BAFA acknowledges that specific procedures outlined in the Supply Chain Due Diligence Act may be feasibly accomplished within an extended timeframe, for instance, where the availability of necessary resources renders immediate compliance unattainable.
In the event that closed questions, which require a simple “yes” or “no” response, necessitate additional information, it is permissible to employ a free text field for supplementation purposes. This may prove advantageous in instances where procedures have not yet reached full completion during the initial reporting period or if the unique organizational frameworks of a company render an affirmative response appear implausible. In the event that a plausible explanation is furnished through the unrestricted text field outlining the rationale behind responding negatively, it will be duly considered by BAFA in a suitable manner. In the event that multiple-choice questions are employed, their purpose is primarily to streamline the procedure.
If all queries of the questionnaire are answered completely and truthfully, the content requirements for the report pursuant to Section 10(2) sentence 2 Supply Chain Due Diligence Act are deemed to have been met.
The provision of information in response to queries that may potentially subject the individual at issue or their immediate family members to the possibility of criminal prosecution or legal proceedings under the Administrative Offenses Act may be declined, in accordance with the right to refuse to give evidence.
Finally, information is only to be provided in the report if and to the extent that it does not constitute trade or business secrets of the company. Information requested in the report which is a trade or business secret may be omitted when answering the question concerned.
Practice notes
The questionnaire provided by BAFA pertaining to the reporting obligations outlined in Section 10(2) Supply Chain Due Diligence Act serves as a valuable tool for companies seeking to meet their legal obligations as stipulated by the aforementioned legislation. It empowers the respective entities to meticulously assess the extent to which they are presently in compliance with the legal obligations pertaining to corporate due diligence as stipulated by the Supply Chain Due Diligence Act. Furthermore, it allows for identification of any areas that may necessitate additional remedial measures. In the event that the responses to the questionnaire are affirmatively stated as “Yes,” it can be inferred that the company has made significant progress towards meeting the obligations set forth in the Supply Chain Due Diligence Act. Conversely, if the responses necessitate a negative assertion of “No,” it is evident that further measures must be taken to comply with said requirements.
As the Supply Chain Due Diligence Act will enter into force on January 1, 2023, it is imperative that all entities subject to reporting obligations duly contemplate the significance of the questionnaire issued by BAFA’s questionnaire and BAFA’s already published Guidances, in particular the Guidance “Complaints Procedure under the Supply Chain Due Diligence Act“ and the Guidance on conducting a risk analysis as required by the Supply Chain Due Diligence Act.
Heuking Kühn Lüer Wojtek advises you on all issues related to the Supply Chain Due Diligence Act.
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