Key takeaways

  • Industrial Accelerator Act introduces Union origin and low-carbon requirements for public procurement (from January 2029) and support schemes in strategic sectors.
  • Energy-intensive industries face low-carbon and Union origin requirements; electric vehicles require EU assembly, 70% EU content, and phased-in battery/powertrain rules; net-zero technologies face tightening thresholds.
  • Businesses must assess Union origin under customs rules; goods from countries with EU free trade agreements or customs unions may qualify as Union origin, subject to Commission exclusions and the application of the EU’s non-preferential rules of origin.
  • Affected businesses should assess supply chains, origin processes, and documentation to maintain access to EU procurement and subsidy programmes once IAA takes effect.

Background

The Industrial Accelerator Act (IAA), introduced by the European Commission on 4 March 2026, is a legislative proposal aimed at supporting EU manufacturers of low-carbon products and net-zero technologies, as well as businesses in energy intensive sectors. The IAA seeks to strengthen the EU’s industrial resilience, competitiveness, and strategic autonomy. It also aims to reverse the declining trend in European manufacturing by increasing its share of EU GDP from 14% in 2024 to 20% by 2035. We have covered the implications of the IAA on foreign investment in an earlier client alert, which provides additional context on the overall initiative.

The IAA targets three strategic sectors: (1) energy-intensive industries, including the manufacture of paper and paper products, coke and refined petroleum products, chemicals and chemical products, rubber and plastic products, non-metallic minerals, and basic metals; (2) the automotive industry, covering the manufacture of motor vehicles, trailers, and semi-trailers, with a particular focus on pure electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles; and (3) net-zero technologies, encompassing batteries, solar energy, heat pumps, onshore and offshore wind technologies, hydrogen electrolysers, and nuclear fission technologies.

This alert focuses on the customs and international trade implications of the IAA, specifically the Union origin and low-carbon requirements affecting businesses in these strategic sectors.

Strengthening the EU’s strategic industrial value chains through “Made in EU” requirements

The IAA establishes measures to create a lead market for certain products in strategic sectors by introducing Made in EU (or Union origin) and low-carbon requirements in the context of public procurement and public support schemes. In effect, the IAA establishes an EU preference for public procurement and public support schemes.

For public procurement, from 1 January 2029, the Commission proposes to apply Union origin and low-carbon requirements to all qualifying procedures above the applicable value thresholds under EU procurement directives. For public support schemes, Member States must apply these requirements to at least 45% of the national budget allocated to energy-intensive industries, and to 100% of the budget for vehicles. Financial support for corporate vehicles may only be granted for vehicles that comply with the Union origin requirements laid down in the IAA, including EU assembly, 70% EU content, and phased-in battery and e-powertrain requirements.

Low-carbon requirements will apply to steel (at least 25% low-carbon), concrete and mortar (at least 5% low-carbon and of Union origin), and aluminium (at least 25% low-carbon and of Union origin) used in buildings, infrastructure, and vehicles. For imported products, emissions data verified under the Carbon Border Adjustment Mechanism may be used to demonstrate low-carbon compliance, which should reduce the administrative burden on businesses. Given the recently proposed measures addressing overcapacity in the EU steel market, the introduction of a Union origin threshold for steel was not considered necessary.

For electric vehicles in public procurement and support schemes, the IAA requires assembly within the Union, at least 70% EU content (ex-works price, excluding the battery), and phased-in thresholds for battery and e-powertrain components of Union origin. Similarly, net-zero technologies such as batteries, solar PV, wind, and electrolysers are subject to phased Union origin requirements that tighten progressively over time. Limited exemptions are available for sole-supplier situations, disproportionate cost (exceeding 25% for procurement or 30% for support schemes), and significant delays (exceeding seven months).

Determining Union origin through customs rules and the impact on trade partners

To determine Union origin, the IAA refers to the customs rules on non-preferential origin. Businesses must ensure their products meet Union origin criteria, submit self-declarations certifying compliance, and, for vehicles, provide origin certification with the certificate of conformity. Affected businesses will therefore need to account for this expansion of the EU rules of origin to intra-EU activities and assess the impact on their trade compliance systems.

Content originating in third countries with which the EU has concluded a free trade agreement (such as Canada or Japan) or a customs union (such as Turkey) or which are part of the WTO Government Procurement Agreement will be deemed to be of Union origin. Accordingly, goods manufactured outside the EU may still qualify as being of Union origin under the IAA. Businesses must carefully assess the applicable origin rules and implement system controls where relevant: while products may qualify for duty preference based on the free trade agreement rules of origin, the conclusion may be different for the purposes of the IAA, where origin is determined on the basis of the Union Customs Code non-preferential rules of origin.

Importantly, however, the Commission is empowered to adopt delegated acts to exclude third countries from the content-equivalent-to-Union-origin provisions on several grounds, including failure to provide national treatment to Union products or entities under applicable trade agreements (i.e., countries that discriminate against the EU); justification to avoid dependencies or other developments threatening security of supply in the EU; and any other applicable exception under relevant trade agreements. These provisions empower the Commission to exclude trade partners from preferential treatment, enabling it to align trade policy with IAA objectives.

Next steps

The IAA is subject to the ordinary legislative procedure, requiring scrutiny and approval by both the European Parliament and the Council of the European Union. While the preparatory documents indicate an expected entry into force in 2027, the ordinary legislative procedure may take longer than anticipated given the political disagreement surrounding the initiative. Once adopted as an EU regulation, the IAA will provide for different phases that progressively tighten Union origin requirements, with stricter thresholds applying from three years after entry into force for net-zero technologies and electric vehicles.

The IAA represents a fundamental shift in EU industrial policy, and businesses that act early to understand and prepare for these requirements will be best positioned to maintain access to EU public procurement and subsidy programmes. Our multidisciplinary team of trade, customs, and competition specialists is ready to assist you in navigating the IAA. We can keep you informed of legislative developments and updates as the proposal progresses through the ordinary legislative procedure. We can also work with you to assess how this initiative specifically impacts your business, considering your existing supply chains and origin determination processes. In addition, we can evaluate whether your current procedures and documentation are in accordance with the evidentiary requirements of the IAA.

In May 2023, the European Commission published its proposal for a reform of EU Customs, describing it as “the most ambitious and comprehensive reform of the EU Customs Union since its establishment in 1968”. Since the launch, significant developments have reshaped the debate: e-commerce volumes have continued to surge beyond levels of customs authorities’ capacity for effective controls, while shifting geopolitical dynamics have introduced new considerations for customs policy. The trilogue process is now nearing its end, with political agreement on the reform anticipated in the coming weeks. The reform will bring significant change for all customs stakeholders: business, authorities, and customers. Below are five highlights of how the new Union Customs Code is poised to change the way goods move in and out of the EU.

  1. The EU is tightening the screws on enforcement at its external border. The Reform represents a fundamental shift towards stricter enforcement rather than trade facilitation. While customs authorities currently operate largely on a national basis with only partially harmonised risk analysis and enforcement practices, the establishment of a European Customs Agency marks a significant step towards deeper integration and consistent enforcement across the EU. Under the current decentralised system, goods denied entry at one customs point can often clear through alternative entry points – because of different enforcement means or priorities, or because of a different take on regulatory obligations. The intention is to close the gaps, creating a more cohesive enforcement network with more automated and EU-wide controls that will track and act on compliance issues across the entire EU external border. The European Customs Agency will assume an increasingly prominent role not only in enforcement but also in the interpretation of customs laws, driving greater uniformity in how rules are applied across all Member States. Businesses can expect more operational disruption if shipments do not meet regulatory requirements, but also more clarity on regulatory expectations for customs clearance.
  1. Centralised customs data: empowering business with access while expanding regulatory oversight. The Reform eliminates customs declarations and introduces an EU Customs Data Hub where relevant customs and product data will be shared. Businesses today struggle to manage their customs data: customs brokers are instructed to clear goods, but what happens next is often a black box. Structurally obtaining data that has been submitted in the customs declaration is difficult, disorganised, costly, and sometimes impossible for importers or exporters. The data hub promises to give businesses ownership of their customs data, enabling them to audit their own and their brokers’ performance, improve compliance, and make corrections where necessary. A critical part of the debate on the data hub has centred on who else will have access to that data. One thing is already clear: this data hub will equip a broad range of enforcement authorities to identify errors and fraud faster and more comprehensively. While enhanced fraud detection is a laudable objective, there is a risk that authorities are quick to jump to premature conclusions of fraud; granting sweeping access to customs data across enforcement bodies therefore raises material concerns.
  1. Away with parcels: a new approach to e-commerce. A clear driver of the Reform is the exponential growth of e-commerce and authorities’ inability to cope with the volumes entering the EU. In recent months, EU authorities have sought to demonstrate that e-commerce presents an obvious compliance challenge: control actions targeting e-commerce imports revealed widespread non-compliance with product laws, and undervaluation is allegedly happening at scale. Concerns raised by Member States heavily impacted by e-commerce volumes have contributed to the accelerated removal of the duty relief for low-value consignment. This measure was carved out from the Reform package and already takes effect on 1 July, with a legally disputable interim flat-rate duty of EUR 3 per item in a B2C parcel until at least 2028. Romania, Italy, and France have introduced scrappy national handling fee measures on e-commerce imports; these unilateral measures lack coordination, as shifting e-commerce volumes have simply increased pressure on other EU entry points. The Reform promises to close the ranks: a Union-wide handling fee will replace any national initiatives as early as 1 November, and the interim flat-rate duty of EUR 3 will eventually give way to standard application of the common customs tariff. A new concept of customs warehouses for distance sales is introduced to incentivise bulk imports, though it remains doubtful that any e-commerce business would voluntarily opt for closer customs scrutiny over non-customs warehouses.
  1. Introduction of the “importer” concept. Arguably the most consequential legal change brought by the Reform is the introduction of an “importer” concept. Surprising to many, the current Union Customs Code contains no definition of “importer”; the concept was introduced indirectly through the customs declaration dataset and holds limited weight. Under the existing regime, what matters for customs duty payment is the declarant, who serves as the primary liable party. The Reform changes just that: the importer becomes the primary liable party – and not just for customs duty. The importer must ensure compliance with all laws enforced by Customs and must be able to present records demonstrating such compliance. Specifically for e-commerce, this means that marketplaces or online sellers will act as importers for distance sales, rather than the private individuals buying online as is currently the case. Whether carefully crafted nuances under product laws regarding placing goods on the market will now be abandoned remains to be seen. What is clear, though, is that the new importer concept provides Customs with an identifiable party against whom any non-compliance can be enforced.
  1. Trust & Check Trader: the Reform’s marketing stunt? The EU’s trusted trader programme of Authorised Economic Operators (AEO) has not delivered on its promises. Most businesses holding AEO status today experience additional authority scrutiny and compliance burdens with little to no tangible benefit. In a Reform that emphasises enforcement over facilitation, the new Trust & Check Trader status presents an apparent tension: the most trusted traders, that is, the most transparent businesses, will receive preferential treatment with minimal customs intervention to clear goods. This status will clearly be reserved for a select few exceptionally well-organised businesses. But even for these businesses, a key consideration will be the broader cost associated with obtaining, maintaining, and having the preferential treatment.

The U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) issued Russia-related General License 134 (“GL 134”) yesterday, which temporarily authorizes the delivery and sale of Russian-origin crude oil and petroleum products that are already on the water as of March 12, 2026.  It is understood the policy intent is to contain the oil prices that rose significantly after the closure of the Strait of Hormuz by Iran.

GL 134 contains broad authorizations, covering activities such as the “sale, delivery, or offloading of such crude oil or petroleum products include transactions for the safe docking and anchoring of vessels carrying such crude oil or petroleum products; the preservation of the health or safety of the crew of any such vessel; emergency repairs or environmental mitigation or protection activities relating to any such vessel; and services such as vessel management, crewing, bunkering, piloting, registration, flagging, insurance, classification, and salvage.”

Importantly, GL 134 also authorizes dealings with vessels and entities normally sanctioned under the OFAC programs listed at the top of the license, including the Russia program.  From an activity-based sanctions perspective, GL 134 also temporarily pauses the U.S. price cap, which was implemented under Executive Order 14071 of the Russian Harmful Foreign Activities Sanctions Regulations, and is one of the programs that is temporarily relaxed by the general license.  Notably, the EU / UK measures, however, including the application of the price cap and any sanctions on designated persons – still remain.  Practically, this means that parties with EU / UK touchpoints may still be exposed to sanctions under the EU / UK regimes if the applicable price cap is not complied with or if the transaction involves a vessel or entity sanctioned by those regimes.

There are two important limitations to GL 134.  The first is that it only applies to products loaded on the vessel on or before 12:01 a.m. Eastern Daylight Time, March 12, 2026.  The license expires on April 11, 2026.  The second is that GL 134 does not authorize activities or transactions that are prohibited by a legal authority other than the ones explicitly mentioned in the GL.  For example, it would not authorize transactions that are otherwise prohibited by OFAC’s Venezuela, DPRK, or Cuba programs.  Moreover, except as authorized by paragraph (a) of the GL, transactions or activities that involve Iran, the Government of Iran, or Iranian-origin goods or services remain prohibited.

EU customs authorities are intensifying enforcement around customs classification, with scrutiny of goods assembled in the EU after importation. The European Public Prosecutor’s Office (EPPO) 2025 Annual Report explicitly identifies assembly operations performed after import as a common fraud pattern used to evade customs duties. The concern centres on components that, when classified individually, attract significantly lower duty rates than the finished products into which they are assembled. And yet, the importation of individual parts of a finished product can be perfectly legitimate, creating a complex legal and operational balancing act between the lawful import of parts and unlawful import of unassembled components. In this article, we explain the current legal framework for customs classification of parts and components in the EU and provide tools for navigating the practical challenges it presents.

Importing product parts versus importing finished products in an unassembled or disassembled state

Under General Rule of Interpretation 2(a), a tariff heading covering a finished article also covers that article when it is incomplete or unfinished, provided it has the essential character of the complete article. A tariff heading also covers a finished article when it is presented in an “unassembled or disassembled” state.

The Harmonised System Explanatory Notes define “unassembled or disassembled” to mean components that will be assembled using fixing devices such as screws, nuts, or bolts, or through riveting or welding. The complexity of the assembly method is irrelevant; what matters is that only assembly operations are involved, meaning the components do not require any further working operations to reach their finished state. In Humeau Beaupréau (C-2/13), the Court of Justice of the European Union clarified that preparatory operations such as roughing components to improve adhesion for gluing are merely stages in the assembly process and do not constitute working operations for completion.

Importantly, in Michaelis (C-165/78), the Court of Justice specified that the above rules apply even where the tariff contains a specific subheading for parts of an article. The concept of parts is subordinate to the concept of a complete or finished article. When a product can be considered complete or finished, importers cannot legitimately rely on the customs classification for parts. The determining factor is therefore whether the constituent parts are capable of being fitted together to form a finished product at the time of importation.

Learnings from satellite receiver imports: stretching the requirement of “simultaneous” presentation to the benefit of anti-avoidance

Components must be presented “simultaneously” for customs clearance to be regarded as an unassembled or disassembled article. When an imported shipment contains all components necessary to assemble a finished product, the analysis will be fairly straightforward. But what if components are imported at different times, through different entry points, by different importers?

In X BV (C-107/22), the Court of Justice held that for the analysis of whether goods are presented in an unassembled or disassembled state, what matters is whether objective facts show that the goods belong together as a unit and are intended to be assembled into a single finished product. The fact that components are declared via separate customs declarations, for different customs procedures, and owned by different companies is not decisive for the customs classification analysis.

The court’s reasoning is aimed at preventing manipulation of tariff classification: a different interpretation would allow importers to manipulate tariff classification through the simple filing of separate customs declarations, enabling importers to choose classification as a finished product or as separate parts, whichever is most favourable for their business. According to the court, this would undermine the fundamental principle that tariff classification must be based on the objective characteristics and properties of goods. This principle has been consistently affirmed across EU case law, with the court emphasising that, in the interests of legal certainty and ease of verification, the decisive criterion for classification must be sought in the objective characteristics and properties of goods as defined in the wording of the relevant heading.

European Public Prosecutor enforcement action on electric bicycles demands greater clarity from European courts

The X BV judgment does not provide clarity for scenarios where imports occur in different shipments at different points in time. In the context of a coordinated action by the EPPO, the General Court of the European Union was recently asked in Denver (T-916/25) to clarify the limits to “simultaneous” presentation. A judgment is forthcoming, but we set out the facts of the case here as these are important to understand the current enforcement context.

In Denver, parts of electric bicycles were imported from China on different dates and through different import points in Italy. The Italian enforcement authorities contend that the importers did not import parts of e-bikes but rather disassembled e-bikes under General Rule of Interpretation 2(a). Importantly, while e-bikes originating in China are subject to substantial antidumping duties, their parts are not. The importers argue that the parts underwent further working operations to complete the manufacture of e-bikes and that therefore they are not components of unassembled e-bikes.

In addition to seeking clarity on whether the operations in this case go beyond assembly, the referring Italian court wants the General Court to examine whether General Rule of Interpretation 2(a) truly requires “simultaneous” presentation. If the answer is affirmative, the enforcement authorities could be found to improperly extend the presentation concept to encompass shipments arriving at different points in time. However, even in a scenario where General Rule of Interpretation 2(a) does not apply and the imports indeed technically constitute “parts”, questions may nonetheless arise regarding an abuse of rights if there is a factual finding of a deliberate importer strategy of artificially splitting consignments with the essential aim of avoiding the payment of customs duties.

Operational difficulties for managing customs classification

Regardless of the outcome in Denver, the customs classification of parts and components presents significant challenges for importers and customs brokers. Customs authorities may look beyond a specific declaration and determine that objective factors indicate that separately declared goods constitute components of a finished product, warranting classification as that finished product. This places customs brokers in a difficult position, as they lack the same visibility as the authorities into what importers are bringing in. Importers, for their part, face the risk that enforcement authorities will engage in overreaching interpretations, scrutinising imported volumes of parts to argue that disassembled items have in fact been imported.

These operational difficulties are compounded by the risk of retrospective adjustment. In X BV, the customs inspector issued a payment notice for nearly €400,000 in additional duties almost three years after the original declarations. This case illustrates the significant financial exposure facing importers and customs brokers who make declarations in good faith based on available information. While Binding Tariff Information decisions would normally allow legal certainty, they relate to specific goods presented by the applicant and would not resolve the information asymmetry that arises when a customs broker is unaware of related components that other importers or brokers may be bringing in.

Given the current state of the law, importers should consider the following measures to mitigate risk:

  • Apply for Binding Tariff Information decisions where there is doubt about the correct classification of components, disclosing the full scope of imports and post-entry working operations.
  • When importing parts, ensure that post-entry operations go beyond mere assembly and constitute satisfactory working operations, and document the processes.

Customs brokers can implement operational improvements to manage the risk, including:

  • Perform enhanced client due diligence to determine whether goods are components intended for assembly into finished products, and whether the client or associated undertakings are importing complementary components.
  • Include red flags for changes in import patterns when customs duties for items increase, particularly when that leads to parts being imported where previously full items were imported.
  • Document the instructions and available information at the time of the declaration, as well as the basis for customs classification decisions.

When the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA) in Learning Resources, Inc. v. Trump, the effects were felt far beyond American shores. European policymakers and businesses are now grappling with what this judicial turning point means for transatlantic commerce.

In the second instalment of our tariff podcast series, Philippe Heeren and Justin Angotti examine the European perspective on this significant ruling. The conversation covers how the decision may reshape the broader EU–U.S. trading relationship, its ramifications for trade deal discussions currently underway, and actionable guidance for companies operating in an uncertain environment.

Listen to the full episode.

Please note that this podcast was recorded on Tuesday 3rd March, prior to the news of a threatened Spanish trade embargo. The tariff landscape is rapidly evolving, and some comments may already be outdated, please refer to our Trump 2.0 tariff tracker for the latest tariff information.

The U.S. Supreme Court’s recent 6-3 ruling in Learning Resources, Inc. v. Trump marks a pivotal moment for international trade—but for importers, the questions are only beginning.

In our latest podcast episode, Michael Lowell and Justin Angotti break down what this decision means for businesses navigating the evolving tariff landscape. They discuss what may happen now that the Supreme Court opinions are out, including alternative tariff authorities that remain available to the administration and practical steps importers can take to preserve potential refund rights.

Listen to the episode here.

Key Takeaways

  • OFSI has published updated enforcement guidance introducing a new case assessment matrix, discount structures, a settlement scheme, and fixed penalties for procedural breaches.
  • The new framework allows for cumulative discounts for voluntary disclosure (up to 30%), settlement (20%), and the Early Account Scheme (up to 20%), which can reduce penalties by up to 70%.
  • Fixed penalties of £5,000 or £10,000 will apply to information, reporting, and licensing breaches.
  • OFSI plans to double maximum penalties to £2 million/100% of breach value.
Continue Reading Carrot over the Stick? Reforms to OFSI Civil Enforcement Processes incentivise early engagement and settlement

Earlier today, the Supreme Court issued its opinion in Learning Resources, Inc. v. Trump. By a 6-3 majority, the Court held that the phrase “regulate . . . importation,” as used in the International Emergency Economic Powers Act (IEEPA), does not include the power to impose tariffs.

As a result of the Court’s ruling, the following tariffs issued under IEEPA are invalid: (1) the “fentanyl” tariffs on Canadian-, Chinese-, and Mexican-origin goods; (2) the reciprocal tariffs; (3) the “free speech” tariffs on Brazilian-origin goods; and (4) the secondary tariffs on Indian-origin goods, which were recently terminated.

The Court’s opinion does not, however, address the issue of importer refunds. The Court of International Trade will now need to decide that issue in the first instance, and the question could make its way back to the Supreme Court on a subsequent appeal.

Preserving refund rights

While the refund question remains open, importers should take steps to preserve their refund rights. Absent new guidance from U.S. Customs and Border Protection (CBP), that can include:

  • Filing protests once individual entries liquidate on the basis that the IEEPA tariffs were unlawfully imposed and collected.
  • Filing suit in the Court of International Trade to cover all entries where the importer paid the IEEPA tariffs.

Although CBP has historically allowed importers to file Post Summary Corrections (PSCs) for unliquidated entries when tariff adjustments have applied retroactively, it is unlikely that CBP will approve PSCs removing the IEEPA tariffs from entries while the refund question is pending.

The European Commission has granted six countries – Algeria, Nigeria, Norway, Qatar, the United Kingdom and the United States – an exemption from prior authorisation requirements for natural gas imports under the RePowerEU Regulation.

What does this mean?

Gas sourced from these six countries will no longer require prior authorisation under Article 5(3) or evidence of country of production five working days in advance – streamlining customs procedures for established supply routes.

For further information about the new exemptions, their practical implications, and what importers need to know looking ahead, see our latest client alert.

In a rapidly evolving geopolitical landscape marked by rising tensions and global economic challenges, the European Union is accelerating efforts to diversify its trade partnerships. One of the most significant recent developments is the signing of the EU-Mercosur Partnership Agreement (EMPA, or the Agreement) and the Interim Trade Agreement (iTA) on 17 January 2026, after more than 25 years of negotiations between the EU and four Mercosur countries: Argentina, Brazil, Paraguay, and Uruguay. The Agreement is historic both in market size and scope. Together, the EU and Mercosur represent more than 700 million consumers, and upon entry into force, the iTA will eliminate import duties on over 90% of goods traded between both blocs. Yet the path forward is not without obstacles; we discuss key developments that are shaping the Agreement’s trajectory below.

Understanding the Agreement’s structure and how to claim trade benefits

The EMPA encompasses both political cooperation and trade components, thus requiring ratification by all EU member states before it can enter into force. In contrast, the iTA covers only the trade and investment aspects of the EMPA and can therefore be ratified at the EU level alone. This two-track approach enables trade-related commitments to take effect ahead of the EMPA’s full implementation. Only goods originating in the respective territories may benefit from preferential treatment under the iTA. Accordingly, the Agreement includes provisions governing the determination of origin, which assess whether products have been wholly obtained in the territory, produced exclusively from originating materials, or manufactured incorporating non-originating materials that fulfil the product-specific rules of origin.

The iTA establishes a self-certification system based on “statements on origin” rather than formal certificates issued by governmental authorities. The statement must appear on the invoice, delivery note, or other relevant commercial document; it must generally bear the original, handwritten signature of the exporter; and it must be submitted within its validity period. Having a statement alone is not sufficient: importers must be prepared to submit, at any time upon request by customs authorities (even after the import happened), all appropriate documents proving the originating status of the imported products. Any products exported under tariff rate quotas granted by the EU must also be accompanied by an official document issued by the Signatory Mercosur State.

The iTA includes several mechanisms to ensure that businesses can enjoy the benefits of the Agreement and protect themselves from unwarranted impacts. Businesses can request an investigation in the event of a threat of serious injury to their industry due to the increase of bilateral trade (see the bilateral safeguard clause below); they can request advance rulings with regard to tariff classification or origin (and, to a degree, also on valuation); and the Agreement foresees administrative and judicial appeal mechanisms against administrative actions, rulings, and decisions of customs or other authorities affecting the trade between the two blocs.

Sensitivities and the road to provisional application

The Agreement has faced strong opposition from agricultural stakeholders and environmental advocates in the EU. Critics argue that it would expose EU farmers to unfair competition from imports produced under weaker labour, environmental, animal welfare, and pesticide standards, threatening farm livelihoods and EU food security. Concerns were also raised about the Agreement’s unprecedented “rebalancing mechanism”, which allows either party to demand compensation or adjust tariff concessions if the other party introduces new laws on environmental, climate, or health topics. Opponents warn that this provision could undermine EU sovereignty by allowing Mercosur countries to challenge and seek compensation for EU sustainability legislation, including measures on deforestation (EUDR), the Carbon Border Adjustment Mechanism (CBAM), and corporate sustainability due diligence (CSDDD).

On 21 January 2026, these concerns prompted the European Parliament to adopt a motion to request the Court of Justice of the European Union to assess the compatibility of the Agreement with the EU Treaties. The Parliament has indicated that it “will be able to vote to grant consent (or not) to the Agreement” only after the Court delivers its opinion. As this is expected to take up to two years, this creates a significant procedural hurdle for the Agreement’s conclusion. Despite the request for an opinion on the legality, the European Commission may still proceed with the provisional application of the Agreement; however, doing so would go against standard practice and enter politically sensitive territory.

Bilateral safeguard clause

On 10 February 2026, the European Parliament furthermore approved a new regulation establishing enhanced safeguard clauses to protect the EU agricultural sector from potential market disruptions resulting from trade liberalisation under the Agreement. The Safeguard Regulation allows the EU to temporarily suspend tariff preferences on agricultural imports from Mercosur countries if a surge in imports threatens to harm EU producers.

The safeguard mechanism introduces stricter thresholds than originally proposed by the Commission. An investigation into protective measures will be triggered when imports of sensitive agricultural products –including poultry, beef, eggs, dairy, garlic, citrus, honey, sugar, and biodiesel – increase by 5% on a three-year average (reduced from the Commission’s proposed 10% per year) and when import prices fall 5% below the relevant domestic price. Investigations may also be initiated at the request of a member state or industry representatives in cases of threatened serious injury. The Commission is required to report to Parliament at least every six months on the impact of sensitive product imports. Once formally adopted by the Council, the Regulation will enter into force alongside the iTA.

Looking ahead

The EMPA represents a landmark achievement in international trade diplomacy, particularly given the scale and economic significance of the markets involved. However, its path to implementation remains uncertain amid ongoing internal divisions within the EU. The recent referral for review by the Court of Justice constitutes an important setback for the European Commission, adding complexity to an already fraught ratification process. As the Agreement navigates these remaining procedural and political hurdles, companies operating across both trade blocs would be well-advised to monitor developments closely and assess potential implications for their cross-border operations. Looking ahead, the EU-Mercosur experience also signals a shift in how the EU approaches trade agreements going forward: frustrated by lengthy ratification timelines, the European Commission has proposed a “possible accelerated procedure” that would shorten the process from conclusion of negotiations to entry into force from 23 months to just 13 months, with trade deals with Indonesia and India identified as potential test cases.

What businesses trading between the EU and Mercosur should consider next

Our International Trade team has capabilities across Europe and Latin America, and we are well positioned to assist you in understanding and leveraging the mechanisms and advantages provided by the Agreement.

While the Agreement is pending ratification, businesses should use this period to prepare. This includes:

  • Supply chain planning and impact assessment: Analyse your supply chains to identify products that may benefit from preferential tariff treatment and those that may require adjustments to meet origin requirements, and assess the potential duty benefits.
  • Origin review: Assess whether your products qualify as “originating” under the Agreement’s rules and review your evidentiary documentation for origin determination purposes, including statements on origin, supplier declarations, and supporting records.
  • Tariff classification analysis: Review the tariff classification of goods that could benefit from potential duty savings under the Agreement and seek advance rulings where appropriate.
  • Compliance gap analysis: Identify gaps in your current documentation and record-keeping practices against the iTA’s requirements.
  • Regulatory monitoring: Keep on top of developments in the ratification process, the Court of Justice proceedings, and any changes to related EU legislation (e.g., EUDR, safeguard regulations).
  • Regulatory compliance: Comply with standalone EU regulations (e.g., EUDR, CBAM, CSDDD) that will remain in effect regardless of the Agreement’s status, ensuring your products meet all necessary standards for market access.

Once the iTA enters into force, businesses should ensure ongoing compliance and maximise the Agreement’s benefits:

  • Authorised Economic Operator (AEO) applications: Consider applying for AEO status to benefit from reduced documentation, fewer inspections, faster release times, and other trade facilitation advantages.
  • Customs broker management: Ensure that customs brokers are appropriately instructed to process preferential duty claims and ensure compliance with origin evidencing requirements.
  • Safeguards: Protect your interests in safeguard investigations, whether you are an EU producer seeking protection or an exporter affected by potential safeguard measures.
  • Customs disputes and appeals: File administrative and judicial appeals against customs decisions affecting your trade.

Should the Court of Justice of the EU issue an adverse opinion or the ratification process otherwise fail, businesses will need to reassess their strategies. In the absence of the Agreement, standard customs rules – including non-preferential origin requirements, most-favoured-nation (MFN) tariff rates, and existing regulatory and market access limitations – would continue to apply. Ensuring compliance with these requirements remains essential to avoid disruptions and hurdles in accessing the EU and Mercosur markets.

  • Non-preferential origin compliance: Assess compliance with non-preferential origin rules and documentation requirements that apply in the absence of a preferential trade agreement.
  • MFN tariff assessment: Analyse the impact of continued MFN tariff rates on your products.

Our cross-jurisdictional teams in Europe and Latin America work seamlessly to provide coordinated advice tailored to your business needs. Please do not hesitate to contact us to discuss how we can support you.