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14 July 2025

The EU Customs reform package advances: The Council of the EU endorses a handling fee on low-value imports

By Stella Nalwoga, Tobias Dolle, and Paolo R. Vergano

On 27 June 2025, the Council of the EU (hereinafter, Council) agreed on a partial negotiating mandate regarding the European Commission’s (hereinafter, Commission) proposals for a new Regulation of the European Parliament and of the Council establishing the Union Customs Code and the European Union Customs Authority, a Proposal for a COUNCIL REGULATION as regards the introduction of a simplified tariff treatment for the distance sales of goods and as regards the elimination of the customs duty relief threshold, and a Proposal for a Council Directive as regards VAT rules relating to taxable persons who facilitate distance sales of imported goods (hereinafter, Customs reform package). Presented already in May 2023, the Customs reform package represents the first major revision of the EU’s Customs Union since its establishment in 1968.

This article examines some elements of the proposed reform, including the amendments introduced by the European Parliament and the Council, particularly the introduction of a handling fee for goods sold via distance sales, the compatibility with World Trade Organization (hereinafter, WTO) rules, and the implications for businesses.

Pursuing EU Customs reform

The EU Customs Union, which is the “world’s largest integrated single market area”, allows goods to move freely within the EU Single Market. According to the European Commission,  Customs authorities of the EU Member States currently operate under “pressures” from various challenges, notably “a huge increase in trade volumes, especially in e-commerce, a fast-growing number of EU standards that must be checked at the border, and shifting geopolitical realities and crises”.

In order to address these challenges, on 17 May 2023, the Commission published the Customs reform package, which aims, most notably, at simplifying the EU Customs processes and reporting requirements for traders, promoting data-driven solutions, and reducing “cumbersome customs procedures”. Key elements of the Customs reform package include: 1) The creation of a new EU Customs Authority (EUCA) and a new EU Customs Data Hub; 2) Making online vendors and platforms responsible for complying with Customs rules (e.g., payment of duties); 3) The elimination of the de minimis exemption for goods valued below EUR 150; and 4) The simplification of Customs procedures.

Significant new obligations for online platforms and non-EU based vendors

More specifically, the new EU Customs Authority would oversee an EU Data Hub. Customs data will only need to be submitted to the EU Customs Data Hub, “as opposed to the multiple interfaces from the many separate systems in place” today across the EU Member States. Regarding the removal of dutyexemptions for goods valued below EUR 150, the Commission proposes to consider online platforms and vendors the ‘deemed importers’. Article 5(13) of the Proposal for the establishment of the EU Customs Code defines ‘deemed importer’ as “any person involved in the distance sales of goods to be imported from third countries into the customs territory of the Union who is authorised to use the special scheme laid down in Title XII, Chapter 6, Section 4 of Directive 2006/112/EC”. According to the Commission, deemed importers would become liable for the collection and payment of import duties on goods entering the EU, regardless of the value.

To address the complexities that businesses face in calculating Customs duties and authorities in collecting them, the Commission proposes to introduce a simplified calculation method for Customs duties (i.e., ‘duty bucketing system’) by amending Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff. The simplified method would apply only on a voluntary basis to low-value goods imported into the EU via distance sales. The proposal for such simplied method foresees five ‘duty buckets’, each of which includes clearly specified categories of goods with a fixed duty rate irrespective of the good’s origin. The Commission explains that, compared to the standard duty calculation process, the ‘duty bucketing system’ would take “as a reference the existing conventional duty rates and does not take into account the originating status of the goods”. However, if the deemed importer “wishes to benefit from preferential tariff rates by proving the originating status of the goods, that person can do so by applying the standard procedures”.

The EU’s co-legislators’ positions focus on enforcement and cost recovery

On 13 March 2024, the European Parliament had adopted its position on the Commission’s proposals, which “voices broad, strong support for the proposal and welcomes the establishment of the new Customs authority and data hub”. Going beyond the Commission’s proposal, the European Parliament proposes the establishment of a platform to be overseen by the proposed EU Customs Authority, through which businesses and EU citizens would be able to flag goods entering the EU internal market that are not compliant with EU rules.

Similarly, the Council’s partial negotiating mandate, agreed on 27 June 2025, supports the Commission’s proposals, while proposing several amendments, mainly to clarify in greater detail “certain customs processes, making them easier to implement by EU Customs authorities and officials on the ground”. Most significantly, the Council proposes a new handling fee to be levied on low-value consignments entering the EU through distance sales. The fee aims at compensating EU Customs authorities for the increased costs of data verification, risk analysis, and inspections resulting from the surge in e-commerce shipments arriving in the EU. The Commission would be tasked with establishing uniform rules for collecting the handling fee, which the Council emphasises should be “commensurate to the services rendered”. In its Communication on A comprehensive EU toolbox for safe and sustainable e-commerce, of 5 February 2025, theCommission had indeed called for the introduction of “a non-discriminatory handling fee for goods imported into the EU directly to consumers” to “address the scaling costs of supervising the compliance of such consignments with EU rules”. The Commission explained that the handling fee “should be incurred by the importer, i.e., the online retailer or intermediary”.

According to a press release published by the Council of the EU, discussions on specific aspects of the overall EU Customs reform package, such as “the seat” of the EU Customs Authority, “the simplified tariff system and the exact design of the handling fee”, would “take place at a later stage”. This underscores why the Council’s negotiating mandate is, currently, only partial.

For non-EU businesses selling via online marketplaces directly to EU consumers, the elimination of the EUR 150 duty exemption for low-value consignments and the introduction of the handling fee represent a fundamental shift. If the Customs reform package were to be adopted with the proposed amendments, such businesses would likely need to adapt their pricing structures and compliance processes, while EU customers of distance sellers could expect price increases.

Assessing the WTO compatibility of the proposed handling fee

Given that the related extra costs for the handling fee would likely be passed on to consumers, thus making products more expensive, and potentially less attractive, than “like”products sold by EU-based online marketplaces, the handling fee could be perceived as protecting EU companies from competition from outside of the EU. In fact, the introduction of a handling fee on low-value consignments raises questions regarding its compatibility with the WTO’s General Agreement on Tariffs and Trade (hereinafter, GATT) 1994.

Under Article VIII of the GATT, fees and charges imposed in connection with importation must be “limited in amount to the approximate cost of services rendered and shall not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes”. While the Council expressly links the handling fee to services provided by Customs authorities, which could partly support its legality under Article VIII of the GATT, the Commission will need to ensure that the calculation methodology remains transparent, non-discriminatory, and proportionate to the actual administrative costs to avoid potential challenges.

Therefore, once further details are known, an examination of the handling fee’s compatibility with the EU’s national treatment obligations under Article III of the GATT, which prohibits WTO Members from discriminating between domestic and imported ‘like’ products concerning internal taxes and regulations, would be crucial.

Shaping the future of the EU Customs regime

The coming months will be pivotal in shaping the rules of the EU Customs Union that safeguards public interests, while facilitating global trade. On 8 July 2025, the Commission, the European Parliament, and the Council entered interinstitutional ‘trilogue’ negotiations to finalise the Customs reform package. As discussions progress, interested stakeholders should engage with policymakers to ensure that the final Customs reform package is both WTO-compatible and business-friendly. Businesses exporting to the EU may want to consult experts in Customs law and trade law to ensure compliance with the rules in order to maintain their access to the EU market.

For any additional information or legal advice on this matter, please contact Paolo R. Vergano

Closing the gaps in CBAM? The European Commission’s proposals regarding downstream products and export relief

By Joanna Christy, Caitlynn Nadya, and Paolo R. Vergano

In July 2025, the European Commission (hereinafter, Commission) announced two complementary proposals that would be tabled by the end of 2025, both aimed at addressing concerns of EU industries and related challenges, due to the “exposure to unfair international competition and regulatory burden” in the context of the EU’s Carbon Border Adjustment Mechanism (hereinafter, CBAM). First, the Commission launched a public consultation on the extension of the CBAM to cover certain downstream products. Second, the Commission announced plans to publish a proposal to relieve EU exporters of CBAM-covered goods from carbon costs incurred under the EU Emissions Trading System (hereinafter, ETS). The proposals will likely be scrutinised by trading partners and are poised to raise concerns regarding their compatibility with World Trade Organization (hereinafter, WTO) rules.

This article examines these latest developments in relation to the CBAM, the rationale behind the proposals, considers their potential WTO implications, and outlines the impacts for affected stakeholders.

The EU’s Carbon Border Adjustment Mechanism

The EU’s CBAM entered into force on 1 October 2023, with a transitional phase until the end of 2025. The CBAM is part of the EU’s efforts under the “Fit for 55 in 2030” package, which aims at reducing greenhouse gas emissions by at least 55% by 2030. The CBAM currently applies to imports of selected carbon-intensive goods, namely cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen, as well as and selected precursors. During the transitional period, EU importers of CBAM-covered goods must report the embedded emissions associated with their imports but are not yet subject to any financial obligations (see Trade Perspectives, Issue No. 7 of 10 April 2023).

Starting in 2026, importers of CBAM-covered goods must purchase and surrender certificates reflecting the embedded carbon emissions of those goods. The price of the certificates will mirror the cost under the EU’s ETS that would have applied if the goods had been produced within the EU. By imposing an equivalent carbon cost to imports from countries without comparable carbon pricing, the CBAM aims at preventing ‘carbon leakage’, which refers to the risk of EU industries relocating production abroad.

The CBAM will operate alongside the ETS, which is based on a ‘cap-and-trade’ system that sets a limit on total amount of greenhouse gas emissions allowed from certain industrial sectors. Companies covered by the ETS may receive emission allowances. While most allowances are auctioned, some are still granted for free to sectors at risk of ‘carbon leakage’. These free allowances will be gradually phased out between 2026 and 2034, in parallel with the gradual phase-in of the CBAM’s financial obligations on imports. However, since the CBAM does not apply to exports, EU-based producers exporting CBAM-covered goods abroad will continue to bear ETS costs without compensation, potentially reducing their competitiveness in foreign markets.

The proposals

With the CBAM approaching full implementation in 2026, concerns over circumvention risks and the lack of protection for EU exporters of CBAM-covered goods have prompted the Commission to propose two targeted proposals. First, as part of the European Steel and Metals Action Plan, published on 19 March 2025, the Commission identified the risk of ‘carbon leakage’ extending down the value chain, and set out actions to: 1) Extend the CBAM tocover “certain steel and aluminium-intensive downstream products”, such as processed steel components and machinery; and 2) “Include additional anti-circumvention measures” in the CBAM. These priorities were reflected in the Commission’s call for evidence launched on 2 July 2025 and open for public consultation until 26 August 2025.

Second, on 2 July 2025, the Commission published a Communication Delivering on the Clean Industrial Deal I (hereinafter, Communication), setting out a roadmap to decarbonise European industry. The Communication announces plans to propose, by the end of this year, a mechanism to reduce the “risk of carbon leakage” for EU exports in CBAM-covered sectors, namely by providing proportional “compensation” for the phase-out of the ETS free allowances. While the scheme would apply for a limited period and be subject to review in 2027, the Commission has not yet specified the extent of the compensation.

The scheme aims at ensuring equal treatment of goods, “whether produced and sold within the EU, imported into the EU or exported”. This proposal responds to long-standing concerns from industry regarding the competitive disadvantage faced by EU exporters of CBAM-covered products subject to the carbon costs under the EU’s ETS. Stakeholders have repeatedly called for relief measures, including free ETS allocations for goods destined for export. While the CBAM is intended to ensure a level playing field within the EU market, EU exporters remain at a disadvantage when competing abroad. For instance, a German steelmaker exporting its products to Southeast Asia must still pay the EU’s ETS-related costs, while competitors (i.e., local producers) in countries without equivalent carbon pricing do not. This asymmetry is viewed by EU industry as a threat to the competitiveness of EU exporters and a potential driver of further ‘carbon leakage’.

Plans to support EU exporters: A WTO (in)consistent approach?

Since its inception, the CBAM has faced scrutiny over its potential inconsistency with the WTO’s most-favoured-nation and national treatment principles. India, for example, raised concerns during negotiations for the EU-India Free Trade Agreement, asserting that the CBAM could adversely affect its steel, aluminium, and cement industries, as well as its export competitiveness. The Commission’s forthcoming proposal to introduce export relief for EU exporters of CBAM-covered goods may raise further scrutiny under the WTO Agreement on Subsidies and Countervailing Measures (hereinafter, SCM).

In fact, if the measure were to take the form of compensation or a tax-equivalent adjustment granted exclusively to EU exporters, it could potentially be characterised as a selective advantage linked to export activity. Under the WTO SCM, such a measure may qualify as a prohibited “export subsidy” under Article 3.1(a) of WTO SCM, provided that it: 1) Constitutes a “financial contribution by a government” under Article 1.1(a)(III) of WTO SCM; 2) Confers a benefit; and 3) Is “specific” within the meaning of Article 2 of the WTO SCM, which is the case when the relief is limited to a particular group. In this case, the particular group would be the EU exporters of CBAM-covered goods. Whether the proposed export relief falls within the scope of a prohibited export subsidy would ultimately depend on its precise scope and implementation.

Implications for traders

The proposal to relieve exporters of CBAM-covered goods from the EU’s ETS costs has sparked considerable controversy. The Bellona Foundation, an international environmental non-profit organisation,raised concerns that introducing a rebate-like mechanism could undermine the CBAM’s objective. As the CBAM is intended to mirror the EU’s ETS carbon costs, imposing charges on importers, while compensating exporters, would create a structural imbalance.

Bellona warned that, if the Commission were to proceed with the proposal, such relief would have to be “conditional on effective and serious decarbonisation commitments”. Otherwise, it risked weakening environmental integrity and enabling loopholes, such as producers misclassifying domestic sales as exports to avoid carbon costs. Regarding the proposal to extend CBAM to downstream goods, critics have warned that it could raise costs for EU manufacturers and consumers, while also imposing significant reporting and traceability burdens.  

Preparing for upcoming CBAM reforms

With respect to the proposed extension of CBAM to certain downstream products, affected stakeholders are encouraged to submit feedback to the public consultation, which remains open until 26 August 2025. The input received will inform the Commission’s impact assessment and the drafting of the forthcoming legislative proposal. Regarding the planned export relief mechanism, exporters should closely follow the Commission’s legislative process and remain alert to further developments.

For any additional information or legal advice on this matter, please contact Paolo R. Vergano

The European Commission’s forthcoming Biotech Act might fast-track EU approvals for novel foods

By Amanda Carlota, Ignacio Carreño García, and Tobias Dolle

On 2 July 2025, the European Commission (hereinafter, Commission) presented its Strategy for European Life Sciences (hereinafter, Life Sciences Strategy) “to position the EU as the world’s most attractive place for life sciences by 2030”. To achieve this objective, the Commission intends to propose several initiatives, including a Biotech Act “to make the EU regulatory system more conducive to biotech innovation in various biotech sectors”.A notable reform under the Biotech Act would be the shortening of the EU’s lengthy approval procedure for novel foods.

This article provides an overview of the Life Sciences Strategy, focusing on the envisioned Biotech Act and on how it could affect the approval procedure for novel foods.

From research to reality: Boosting the EU’s competitiveness in life sciences

Simply put, life sciences study living systems using an interdisciplinary approach. As such, life sciences have applications in many sectors, such as health, food, and agriculture. Biotechnology, which is a subset of life sciences, is defined by the Organisation for Economic Co-operation and Development (OECD) as “the application of science and technology to living organisms, as well as parts, products, and models thereof, to alter living or non-living materials for the production of knowledge, goods, and services”. According to the Commission, biotechnology is an “essential tool to progress knowledge in life sciences”.

The EU has long been a leader in life sciences. According to Commission data, in 2022 alone, life sciences generated EUR 1.5 trillion in value added, corresponding to 9.4% of the EU’s GDP. However, the EU has been losing ground globally, due to its fragmented innovation ecosystems, a limited valorisation of technological breakthroughs, the underuse of data and artificial intelligence, and slow market uptake. According to the Commission, the challenge is to turn “cutting-edge research into real-world solutions”.

To achieve this, the Life Sciences Strategy lays out the Commission’s proposed actions in key areas, one of which is the promotion of “innovation-responsive regulation”. One such regulation is the envisioned Biotech Act,which would pursue to “make the EU regulatory environment more conducive to innovation, attract innovation and investors, and make it easier for spin-offs, start-ups, and scale-ups to bring biotechnologies from the laboratory to the factory and onto the market”.In this context, the Commission foresees the simplification of the approval procedure for novel foods.

Novel foods: Balancing innovation and food safety

The EU’s Novel Foods Regulation (i.e., Regulation (EU) 2015/2283 of the European Parliament and of the Council of 25 November 2015 on novel foods, hereinafter, NFR) applies since 1 January 2018. Article 3(2)(a) thereof defines ‘novel food’ as any food that was “not used for human consumption to a significant degree”in the EU before 15 May 1997. Applications for a novel food authorisation must be submitted directly to the Commission via the E-Submission Food Chain Platform. A risk assessment is carried out by the European Food Safety Authority (hereinafter, EFSA) and the Commission bases its decision on the EFSA’s scientific evaluation. A novel food may only be placed on the EU market if: 1) It does not pose any risk to human health; 2) Its intended use does not mislead consumers; and 3) Its normal consumption would not be nutritionally disadvantageous in case it is intended to replace another food.

Article 3(2)(a) of the NFR defines ten categories of novel foods, which can be summarised as follows: 1) Foods originating from plants, animals, microorganisms, cell cultures, minerals, etc.; 2) Specific categories of foods (e.g., insects, vitamins, minerals, foods used exclusively in food supplements before 1997, etc.); 3) Foods resulting from production processes and practices; and 4) Food developed through modern technologies (e.g., foods with intentionally modified or new molecular structure, nanomaterials), which were not produced or used in the EU before 1997 and thus may be considered to be novel foods. To date, there are more than 200 authorised novel foods in the EU.

Novel food authorisation: a lengthy approval process

The procedure for placing novel foods on the EU market is laid down in Article 10 of the the NFR and further detailed in Commission Implementing Regulation (EU) 2017/2469 laying down administrative and scientific requirements for applications referred to in Article 10 of Regulation (EU) 2015/2283 on novel foods. On the basis of these rules, the validation of an application submitted to the Commission should require one to three months, but past applications suggest that the process actually takes three to six months.

If the Commission requests the EFSA to carry out a risk assessment, the EFSA must provide its scientific opinion within nine months. However, the EFSA may suspend the evaluation to request additional information, such as nutritional studies and toxicological studies. Past applications indicate that the EFSA typically suspends the evaluation one to three times. Within seven months from the publication of the EFSA’s opinion, the Commission must submit to the EU’s Standing Committee on Plants, Animals, Food and Feed a draft implementing act authorising the placing on the market of the novel food and updating the EU’s list of authorised novel foods. A novel food may only be placed on the EU market once it is included on this list.

Shortening approval times and improving guidance 

The EU’s novel food approval process is widely considered one of the most stringent and authoritative in the world. However, it is both costly and time-consuming, and is considered to threaten the EU’s vision of global competitiveness. According to a study published in July 2025, the evaluation process“delays access to food innovation” in the EU. Notably, the average novel food application with the EFSA’s involvement takes around 2.56 years, although 86.81% of its opinions are positive. The researchers concluded that the lengthy delays were “hindering the growth of European companies, limiting innovation and ultimately putting jobs and investment at risk”. In contrast, a novel food evaluation by the Singapore Food Agency (SFA) takes between 9 and 12 months.

The EU’s forthcoming Biotech Act is expected to pursue the fast-tracking of the approval procedure for novel foods in order to allow innovative companies to obtain market authorisations more quickly. The Commission’s proposal will likely involve significant reductions in the time allotted for the validation of applications, risk assessment, and the issuance of decisions, as well as limitations on the number of times that the EFSA may suspend the evaluation to request additional information during the risk assessment stage. In order to avoid or reduce additional requests, the EFSA’s Guidance on the preparation and presentation of an application for authorisation of a novel food, issued in 2016, may need to be improved.

“No time to lose”

A schedule accompanying the Life Sciences Strategy states that the Biotech Act would be proposed in 2026 “at the latest”, and the European Commissioner for Health and Animal Welfare, Olivér Várhelyi indicated that the Commission plans to publish the text of the Biotech Act still within 2025, stating that the EU has “no time to lose”. Stakeholders are advised to keep monitoring related developments and convey their priorities to EU decisionmakers.

For any additional information or legal advice on this matter, please contact Ignacio Carreño Garcia

Recently adopted EU legislations

Market Access

Trade Remedies

Food Law

Amanda Carlota, Ignacio Carreño García, Tobias Dolle, Joanna Christry, Caitlynn Nadya, Stella Nalwoga, and Paolo R. Vergano contributed to this issue.

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