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20 October 2025

The European Commission presents a proposal for a new steel measure: Towards major imports restrictions for steel?

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

On 7 October 2025, the European Commission (hereinafter, Commission) presented a Proposal for a Regulation of the European Parliament and of the Council addressing the negative trade-related effects of global overcapacity on the Union steel market, which would introduce a general trade restrictive tariff-rate quota (hereinafter, TRQ) on imports of steel products from all countries. If adopted, steel imports into EU outside of the set quota would be subject to a tariff of 50%.

This article provides a brief overview of the Commission’s Proposal, assesses the compatibility of the proposed measures with the EU’s obligations under the rules of the World Trade Organization (hereinafter, WTO) and under the EU’s preferential trade agreements (hereinafter, PTAs), and analyses the implications for EU trading partners and businesses.

The EU’s steel safeguards

On 31 January 2019, the Commission had adopted a definitive safeguard measure on certain steel imports. The measure was introduced in response to the US’ additional tariffs on steel, which had been introduced on 23 March 2018, and which, according to the Commission, created a “risk of trade diversion” towards the EU market and “serious injury” to EU producers. Under the current steel safeguard, the EU sets an annual quota applicable to 26 categories of steel products, such as metallic coated sheets and gas pipes, and levies a tariff of 25% on imports that exceed the quota.

The current steel safeguard excludes developing countries accounting for less than a 3% share of EU imports, as well as certain countries with which the EU has concluded Economic Partnership Agreements and members of the European Economic Area (i.e., Norway, Iceland, and Liechtenstein). The current steel safeguard measure is set to expire on 30 June 2026, which is why the Commission has prepared a new Regulation. 

Context and rationale for the new measure

On 19 March 2025, the Commission published its Steel and Metals Action Plan (SMAP), which recognises that “the structural global overcapacities and their negative trade-related impact on the EU’s steel industry, which necessitated the imposition of the steel safeguard measure, will not disappear on 1 July 2026”. The proposed Regulation responds to “increasing overcapacity, increasing imports of steel and closing of third country markets”, which added to the “internal challenges” faced by the EU’s steel industry, such as “an increase of trade-restrictive measures across third countries, high energy and manufacturing costs in the EU, and lower internal demand”.

The Commission justifies the more restrictive nature of the proposed Regulation by arguing in Recital 15 of the proposed Regulation that, “taking into account the level of tariffs in the steel sector in other key markets, it is appropriate to set the level of out-of-quota tariff to a 50% duty to minimise the risk of trade diversion”, which would apply “in addition to other duties” imposed on the covered steel products. Notably, the US currently imposes an additional tariff of 50% on imports into the US of steel from all countries, which, arguably, creates a “risk of trade diversion” towards the EU market.

The proposed measures

Under Article 1 of the proposed Regulation, tariff quotas would be opened on “an annual basis” across all 28 covered product categories, defined in Annex I, such as stainless wire rod, railway material, and sheet piling, with a corresponding “specific volume of tariff quota” detailed in Annex II. Once the quotas are exhausted, any imports of covered steel products would be “subject to a custom duty at the rate of 50% ad valorem”. The Commission explains that the proposed measures would limit “tariff-free import volumes to 18.3 million tons a year”, which would be “a reduction of 47% compared to 2024 steel quotas”. In accordance with Article 2 of the proposed Regulation, the quotas would be managed by the Commission and the EU Member States and would be “administered quarterly”.

The Commission also seeks to strengthen the “traceability of steel markets by introducing a Melt and Pour requirement to prevent circumvention”. Article 3 of the proposed Regulation defines “melt and pour” as the “original location in which raw steel and iron is initially produced in liquid form within a steelmaking or iron making furnace and subsequently cast into its first solid state”. At the moment of importation, importers would be required to provide “appropriate evidence, such as a mill certificate which will prove the country of ‘melt and pour’ of the steel used in the production of the product”. 

Crucially, unlike the current steel safeguard, the proposed Regulation eliminates differential treatment among the EU’s trading partners. Under Article 1bis of the proposed Regulation, exemptions would be limited only to members of the European Economic Area. Imports from PTA partners are expressly included within the scope of the proposed Regulation and the Commission explains that “an exclusion of FTA partners’ imports is not possible”, as they “represent 2/3 of total imports, some of which contribute to overcapacity, and such an exclusion would make the measure totally ineffective”.

This approach has drawn criticism from scholars, warning that the proposed Regulation implied “a breach of all the FTAs the EU has with third-country steel suppliers, and a major obstacle to concluding negotiations with steel exporters such as India”. Article 4bis of the proposed Regulation allows the EU to adopt implementing acts “imposing bilateral safeguard measures on imports of products within the scope of this regulation originating in those countries with which the European Union has concluded a free trade agreement”.

Such safeguard measures must comply with the requirements of the applicable agreement and would “replace the tariff measures” imposed under the proposed Regulation. In practice, this means that the EU would need to trigger safeguard procedures under those agreements, such as Article 3.1 of the EU-Korea Free Trade Agreement, which would, in turn, entitle South Korea, to “suspend the application of substantially equivalent concessions” under Article 3.4 of the Agreement if no mutually agreed solution is reached.

Negotiating compliance: The WTO dimension of the proposed measures

The Commission has assured the EU’s trading partners that the proposed measure is “fully WTO compliant”, noting that, once authorised by the Council of the EU, the EU would “swiftly engage with affected EU trading partners” under the procedure for the ‘Modification of schedules’ laid down in Article XXVIII of the WTO General Agreement on Tariffs and Trade (GATT) “with a view to offering them country specific allocations”.

Article XXVIII of the GATT allows WTO Members to modify or withdraw a tariff concession through negotiations with those WTO Members with whom the tariff concession was initially negotiated (i.e., WTO Member holding an ‘Initial Negotiating Right’, INR) and other WTO Members that have a ‘principal supply interest’ regarding the relevant good, while also requiring consultations with any WTO Member that may have a ‘substantial interest’ in the concession, modification, or withdrawal. WTO Members with a “principal supply interest” would be those with the largest share of imports into the EU, while a “substantial interest” exists when at least 10% of imports of steel originate from the relevant WTO Member.

Nevertheless, scholars caution that the scope and severity of the proposed measures, namely the 50% out-of-quota tariff and the sharp reduction in duty-free volumes, were likely to trigger complex and contentious compensation negotiations. If negotiations with a trading partner were to fail, the EU may still proceed pursuant to Article XXVIII:3(a) of the GATT, but trading partners with an INR and those with principal and substantial supply interests could lawfully withdraw equivalent concessions, potentially leading to reciprocal trade retaliation. Currently, the top exporters of steel products to the EU are China, India, Japan, South Korea, Taiwan, Türkiye, and Viet Nam.

Trade impact and industry reactions

The most immediate implication would be a sharp reduction in steel import volumes due to the combination of significantly reduced tariff-free quotas and a 50% out-of-quota duty. Additionally, the proposed requirement to trace the origin of steel through the “melt and pour” process could significantly increase documentation and certification obligations for importers. For instance, the China Chamber of Commerce to the EU (CCCEU) described the proposed measures as a “protectionist step” that could disrupt supply chains and harm “downstream industries, particularly the automotive, machinery, and construction sectors”.

Legislative and trade negotiations outlook

The Commission’s proposal will now go through the EU’s ordinary legislative procedure. The European Parliament and the Council of the EU must agree on the final text of the Regulation and, once adopted, the measure will replace the current steel safeguard when it expires in June 2026. In parallel, the EU faces a demanding phase of international engagement both in the context of the WTO, as well as under the applicable PTAs.

Businesses and governments should adopt a strategic engagement approach, combining active participation in the EU policy process with early positioning in forthcoming WTO and bilateral negotiations, to mitigate commercial disruption and secure most favourable market access.  

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

The EU moves closer to revising its Tobacco Taxation Directive: Will this further incentivise illicit trade?

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

On 16 July 2025, the European Commission (hereinafter, Commission) published a Proposal for a Council Directive on the structure and rates of excise duty applied to tobacco and tobacco related products (recast) (hereinafter, Proposed Council Directive), which is currently open for public consultation until 31 October 2025. Through the Proposed Council Directive, the Commission seeks to amend the EU’s excise tax framework for tobacco products, notably by “revising the structure of minimum rates and certain definitions of traditional products and enlarging the scope” to include “new products and raw tobacco”. The Proposed Council Directive represents the most significant overhaul of the EU’s excise tax framework for tobacco products since 2011, with far-reaching implications for manufacturers and consumers.

This article provides an overview of the Proposed Council Directive, outlines the key measures envisaged, assesses their compatibility with the stated objectives of public health protection and proper functioning of the internal market, and discusses the implications for the EU tobacco industry and for consumers.

Context and rationale for updating the EU’s excise tax framework

The current legal framework on excise duties for tobacco products in the EU is established under Council Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duty applied to manufactured tobacco (hereinafter, Tobacco Taxation Directive), which lays down “general principles for the harmonisation of the structure and rates of the excise duty to which the Member States subject manufactured tobacco”. According to the Commission, the Tobacco Taxation Directive forms part of a broader EU policy framework that sets “the common provisions for all products subject to excise duties and the Customs Union legislation, as well as tobacco control policies and the policies against illicit trade, tax fraud and tax avoidance”. The Tobacco Taxation Directive statedly has the dual objective of ensuring the “proper functioning of the EU’s internal market” and a “high level of health protection”.

The Commission’s 2020 evaluation of the Tobacco Taxation Directive found that it no longer fully achieves those objectives, arguing that: 1) The minimum excise rates have not been updated in over a decade, diminishing their effectiveness in deterring consumption and aligning fiscal policies across EU Member States; 2) Significant price differentials continue to encourage cross-border purchases, “resulting in a significant loss of tax revenues” for some EU Member States and undermining “public health policy” concerns; 3) The Tobacco Taxation Directive’s limited scope does not provide “a harmonised taxation regime for new products”, such as electronic cigarettes, heated tobacco products, and “a new generation of modern products containing nicotine”; and 4) EU Member States were concerned with the persistent and “substantial” illicit trade in tobacco products and the “diversion of raw tobacco to illicit manufacturing within the EU”, which further undermine both fiscal revenues and public health objectives. The evaluation concluded that “a more comprehensive approach, taking on board all aspects of tobacco control including public health, taxation, the fight against illicit trade and environmental concerns” was needed.

Key elements of the Proposed Council Directive

According to the Commission, given the “lack of effectiveness, relevance and coherence” of the Tobacco Taxation Directive, the amendments proposed in July 2025 aim at ensuring the proper functioning of the internal market, at ensuring a high level of human health protection in line with Europe’s Beating Cancer Plan, at strengthening the fight against fraud and tax evasion, and at safeguarding the EU Member States’ tax revenue. In order to achieve those objectives, the Commission proposes significant amendments to the Tobacco Taxation Directive, which would apply from 1 January 2028.

First, the scope of the Tobacco Taxation Directive would be extended to cover certain new product categories, such as waterpipe tobacco, heated tobacco, liquids for electronic cigarettes, and nicotine pouches. The Commission notes that these amendments would ensure harmonised definitions for fiscal classification and treatment, as well as coverage under the EU’s excise movement and control system (EMCS), an EU track-and-trace system for the movement of excise goods.

Second, in order to fight the illicit trade of tobacco, the Commission proposes to include raw tobacco within the scope of the Tobacco Taxation Directive. Article 2(3) of Proposed Council Directive defines “raw tobacco” as “any form of harvested tobacco that has been cured or dried and is not manufactured tobacco”, as defined in the Directive. Article 23 of the Proposed Council Directive states that “raw tobacco grown in the Union and imported from third countries shall be subject, in each Member State, to a minimum excise duty of EUR 0 per kilogram”. The Commission argues that bringing raw tobacco in-scope would allow greater oversight of raw tobacco movements across the EU through the EMCS.

Third, the minimum excise rates applicable to in-scope product categories would be substantially increased, as set out in Articles 12 to 22 of the Proposed Council Directive. For example, for cigarettes, the current minimum rate is 60% of the weighted average retail selling price and €90 per 1,000 items, which the Commission proposes to increase to “63% of weighted average retail selling price and at least €215 per 1 000 items”. For new product categories, such as nicotine pouches, the Commission proposes a minimum excise tax rate of “25% of the retail selling price or €71.5 per kg” between 2030 to 2031, which would increase to “50% of the retail selling price or €143 per kg” from 2032. Moreover, the Directive would introduce a mechanism to automatically update the EU minimum rates every three years in line with inflation, and to adjust rates using a purchasing power parity correction to account for income disparities among EU Member States.

Balancing public health and internal market objectives

The Commission’s proposal builds on the Tobacco Taxation Directive’s dual legal basis, namely Article 113 of the Treaty on the Functioning of the European Union (hereinafter, TFEU) concerning the harmonisation of excise duties to ensure the functioning of the internal market and Article 168(1) of the TFEU on the protection of public health. From a legal perspective, the revision aims at striking a balance between these objectives. Yet, whether the proposed measures will indeed achieve this equilibrium remains rather questionable.

The proposed minimum rates and automatic indexation mechanisms statedly pursue public health objectives and are designed to deter tobacco consumption by increasing the price of tobacco and nicotine-containing products. However, past incidences have shown that, if the price of legitimate tobacco products increases significantly, consumers increasingly turn to illicit or cross-border alternatives, undermining both fiscal and health objectives. Indeed, the Commission’s own evaluation acknowledges persistent and, in some cases, growing crossborder shopping and illicit trade. A 2024 report by KPMG finds that EU Member States with high excise taxes see a higher incidence of illicit products and that tax increases lead to a sharp increase in purchases of illicit products. Notably, for 2024, KPMG finds that the consumption of illicit cigarettes in France, where the excise tax is particularly high, accounted for nearly 40% of overall consumption.

Higher minimum excise tax rates could encourage consumers to substitute legal products with untaxed, unregulated, and potentially unsafe alternatives. While the inclusion of raw tobacco under the EMCS may represent a positive step towards addressing illicit trade in tobacco products, this alone may not be sufficient to offset the risks introduced by the tax increases. The proposed tax increases may need to be reevaluated and should, at the very least, be accompanied by further measures to address illicit tobacco and nicotine-containing products.

Implications for businesses and consumers

For tobacco manufacturers, distributors, and retailers, the proposed Directive entails significant commercial challenges. Substantial increases in excise duty rates will affect product pricing and consumer demand. Companies operating in high-tax jurisdictions are particularly concerned about the widening gap between legal and illicit markets. Industry representatives, such as Tobacco Europe, have cautioned that the proposed minimum rates would “go beyond what is justified by consumer income evolution and economic evidence”, warning that the result could be reduced legal sales, lower excise revenues, and a resurgence of illicit trade.

Outlook

The Commission’s proposal to revise the Tobacco Taxation Directive is portrayed as an ambitious attempt to modernise the EU’s excise tax framework on tobacco products in line with public health objectives. However, the proposed increases of the minimum excise rates risk undermining the objectives if legitimate products are merely replaced by illicit alternatives.

Following the ongoing public consultation, the Proposed Council Directive will be sent to the Council of the EU for agreement and to the European Parliament and the Economic and Social Committee for consultation. Interested stakeholders should participate in the public consultation to ensure that the proposed amendments are balanced, evidence-based, and capable of achieving the intended policy objective across the EU without further encouraging illicit trade.  

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

From plastic to pixels: Thailand’s Food and Drug Administration publishes voluntary digital labelling rules for bottled water and mineral water

By Imelda Jo Anastasya, Joanna Christy, and Paolo R. Vergano

On 10 September 2025, Thailand’s Food and Drug Administration (hereinafter, FDA) published two draft Notifications of the Ministry of Public Health for certain bottled water products, namely: 1) Notification (No. 462) Regarding Drinking Water in Sealed Containers B.E. 2568 (2025) (hereinafter, Notification No. 462), which applies to drinking water offered in sealed containers; and 2) Notification (No. 464) Regarding Natural Mineral Water (No. 2) B.E. 2568 (2025) (hereinafter, Notification No. 464), which applies to natural mineral water. These Notifications prescribe rules on, inter alia, chemical contaminant limits and voluntary digital labelling. The draft Notifications are currently awaiting the signature of the Minister of Public
Health before publication in the Thai Royal Gazette and its entry into force.

This article examines the FDA’s proposed digital labelling rules, compares them with relevant EU digital labelling rules and other measures adopted to reduce plastic pollution, assesses the applicability of World Trade Organization (hereinafter, WTO) rules, and highlights the potential implications for producers and traders.

Digital labels to help reduce plastic waste and limiting ink and adhesive contamination 

It is estimated that Thailand generates more than 3.2 million tonnes of plastic waste annually. In December 2024, the FDA, together with the Pollution Control Department under Thailand’s Ministry of Natural Resources and Environment, outlined strategies to address the growing problem of plastic waste, including promoting the use of label-free drinking water bottles and introducing digital solutions for displaying product information. Importantly, it has been found that bottle labels can impede recycling, as the plastic pellets derived from these labels are more difficult to process due to adhesive and ink residues.

The draft Notifications would allow producers to use digital labels instead of traditional ink-printed labels on bottles. According to the Secretary General of the FDA, Surachoke Tangwiwat, the digital labelling scheme aims to, inter alia, reduce ‘label waste’, lower the cost of recycled plastic, limit ink and adhesive contamination, as well as encourage products to adopt more eco-friendly packaging.

Digital labelling requirements

To address plastic pollution resulting from label-related plastic waste, the draft Notifications establish digital labelling rules governing the manner in which product information is to be provided, namely through embossing or engraving, with access to online information provided via a QR Code. The draft Notifications also prescribe rules regarding the technical specifications for accessing the QR Code, as well as the requirements for embossing or engraving the bottled water. The new digital labelling scheme is voluntary and applies only to products manufactured in Thailand, with the aim of supporting the domestic recycling industry. Once the draft Notifications enter into force, Thai producers may choose between conventional plastic labels printed with ink and the digital labelling.

The following information must be embossed or engraved directly on the bottle: 1) The product name, brand, or trademark; 2) The water bottle production’s serial number; 3) The net quantity, and; 4) The date, month, and year of manufacture and the expiration or best-before date. The marking must adhere to the required font size prescribed in the Notification of the Ministry of Public Health (No. 450) Regarding Labelling of Prepackaged Foods B.E. 2567 (2024) (hereinafter, Notification No. 450). In addition, a QR code must be placed on the bottle cap, linking to an online label that contains all additional information, such as weight and nutrition information, as prescribed by Notification No. 450. To ensure accessibility and compliance, the digital label must always be available via a continuously maintained system, with all critical statutory information displayed instantly on the first screen upon scanning.

Digital labelling trends across jurisdictions

There is a growing trend of digital labelling across various jurisdictions, although the underlying motivations and rationales vary. The use of digital labelling for reducing ‘label waste’ remains an emerging concept, with Thailand being, so far, the only ASEAN Member State to introduce such labelling scheme for this purpose. Although Singapore, through the Guidelines on Voluntary Electronic Labelling for Complementary Health Products and Indonesia, through Head of the Food and Drug Supervisory Agency Decree No. 317 of 2023 on the Implementation of the E-Labelling Pilot Project, have introduced provisions on digital labelling, these only apply voluntarily to health products, such as medicines, and are primarily intended to facilitate public access to product information digitally, rather than to reduce ‘label waste’.

In other jurisdictions, such as the EU, digital labelling is intended to: 1) Enhance consumer information and transparency, as reflected in the EU’s mandatory digital labelling requirements for wine under Regulation (EU) No 1306/2013 and Regulation (EU) No 2021/2117; and 2) Reduce costs by simplifying labelling obligations for businesses, as demonstrated by the EU’s proposal on voluntary digital labelling of EU fertilising products.

Applicability of WTO rules

As the digital labelling rules under both draft Notifications remain voluntary, rules under the WTO’s Agreement on Technical Barriers to Trade (hereinafter, TBT Agreement) for technical regulations do not apply. Annex 1.1 to the TBT Agreement defines “technical regulations” as documents that lay down product characteristics or related processes and production methods, including applicable administrative provisions, with which “compliance is mandatory”. Thailand’s voluntary digital labelling rules, therefore, cannot be considered “technical regulations”. The TBT Agreement also addresses standards, which are defined as documents that are “approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory” and WTO Members must adhere to the Code of Good Practice for the Preparation, Adoption and Application of Standards.

Should the labelling requirements become mandatory, Thailand would need to ensure that the labelling requirements are not more trade-restrictive than necessary to fulfil a legitimate objective, such as the protection of the environment, pursuant to Article 2.2 of the TBT Agreement. The digital labelling rules would then also need to be notified to the WTO TBT Committee to inform trading partners and allow them to comment.

Implications for stakeholders

Notification No. 462 is set to take effect on the day after its publication in the Royal Thai Gazette, while Notification No. 464 does not indicate an effective date. Prior to the issuance of the draft Notifications, Boonrawd Trading Co., Ltd., the distributor of Singha drinking water in Thailand, already introduced a label-free bottle with an embossed logo, eliminating the need for a plastic sleeve, but without any digital labelling through a QR code.

Once the Notifications enter into force, companies in Thailand may start relying on digital labelling. Through this digital labelling initiative, businesses stand to benefit from more sustainable and cost-efficient labelling practices, while consumers would benefit from improved access to accurate, comprehensive, and up-to-date product information. This development would also mark the first step towards broader digital labelling implementation in the ASEAN region that is aimed at reducing ‘label waste’. The potential implications include changes in marketing strategies and the need for companies to adopt new technologies to comply with future digital labelling practices.

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

European Commissioner for Health appears supportive of an EU-wide tax on food products high in fat, salt, or sugar (HFSS)

By Amanda Carlota, Ignacio Carreño García, and Tobias Dolle

In September 2025, the European Commissioner for Health and Animal Welfare, Olivér Várhelyi, stated that he was open to introducing an EU-wide tax on food products that are high in fat, salt, or sugar (hereinafter, HFSS) to help finance public health programmes. Commissioner Várhelyi’s comments follow the publication in May 2025 of a study by the European Commission’s Directorate-General for Taxation and Customs Union (hereinafter, DG TAXUD) on the design, implementation, and impact on public health of HFSS taxes in the EU.

This article provides an introduction on the concept of HFSS taxes and the related legal considerations, and discusses the conclusions of the study. Lastly, the article discusses other public health initiatives, such as bans or restrictions on junk food advertising aimed at children.

Taxing HFSS products to help finance public health

A tax on HFSS products may be defined as a tax or surcharge placed upon fattening foods or beverages with the aim of decreasing consumption of foods that are linked to obesity and cardiovascular diseases. On 25 September 2025, during an exchange of views with the European Parliament’s Committee on Public Health, the European Commissioner for Health and Animal Welfare, Olivér Várhelyi, signalled his openness to a taxation system on products high in fat, sugar, and salt to help finance public health programmes. With respect to taxing such food, Commissioner Várhelyi stated that this was “something we can reflect on within the framework of the EU’s Cardiovascular Health Plan”, referring to a broad initiative intended to “help Member States reduce the burden of cardiovascular diseases on citizens, society and economy”.

Commissioner Várhelyi added that it was “not about limiting the availability of products that people want to buy”, but rather to “influence choices”. Commissioner Várhelyi argued that, if such a discussion were to move forward, it would be necessary to ensure that the revenues could only be spent on public health and not used to fill budget gaps. A call for evidence regarding the non-legislative Commission Communication on the EU Cardiovascular Health Plan, which would, inter alia, address the prevention of cardiovascular diseases, such as by addressing unhealthy behaviours to reduce the risk factors for cardiovascular diseases, had been open until mid-September and the adoption of the Cardiovascular Health Plan is anticipated for the fourth quarter of this year.

Exploring the idea of EU-wide excise taxes on HFSS products

In May 2025, DG TAXUD published a study that explores the idea of EU-wide excise taxes on HFSS products, following measures already in place in several EU Member States. Noncommunicable diseases such as obesity, diabetes, cardiovascular disorder, make up 80% of the disease burden in the EU, with major implications for national health budgets. The study finds that the taxation of unhealthy food, such as sugary drinks, has the potential to help address this challenge. Notably, there is evidence that manufacturers have reduced sugar content in soft drinks following the introduction of tax schemes. Related price increases also led to a reduction in consumption and a shift towards healthier products, the magnitude of which varies across countries.

According to the study, 11 EU Member States have introduced some form of HFSS taxation. Nine of them, namely Belgium, Croatia, Finland, France, Ireland, Latvia, the Netherlands, Poland, and Portugal, focus exclusively on sugar-sweetened beverages (hereinafter, SSBs). Denmark taxes ice cream, chocolate and confectionery, while Hungary taxes both SSBs and other HFSS products. The study also considers the possibility and the potential added value of an EU harmonised tax, which could help to reduce differences in tax rates and tax structures across EU Member States and promote a more level playing field for businesses and consumers. The study also notes that any efforts to harmonise health taxes would need to take into account the different public health priorities and fiscal contexts of EU Member States.

Ineffectiveness of taxing HFSS products?

In 2011, in order to reduce the consumption of foods that are not beneficial to public health and to promote healthy nutrition, as well as to improve the financing of health services, Hungary adopted Act CIII of 2011 on the public health product tax. The tax increased the price of numerous foodstuffs and drinks that are considered harmful or non-beneficial for public health (e.g., soft drinks, pre-packaged products with added sugar, salted snacks, flavoured beers).

On 1 July 2022, the scope of the tax was extended to foodstuffs and drinks with added sweeteners, as well as to pre-packed sweet and savoury pastries. A study, published in 2024, concludes that, “despite the tax being introduced, consumers continued to consume the same or even higher amounts of unhealthy food as before”.

Legal considerations of introducing an EU-wide tax

Since several EU Member States have adopted such taxes on HFSS products, which vary considerably, the EU may consider an EU measure harmonising such taxes. The first obstacle faced by the EU in the establishment of such a fiscal measure would be the issue of competence: to what extent could the EU harmonise HFSS taxes, imposed on public health grounds? Both health policies and taxation fall within the eminent domain of EU Member States.

Although the EU has no competence in terms of direct taxation, it is entitled, under Article 113 of the Treaty on the Functioning of the European Union (TFEU), to “adopt provisions for the harmonisation of legislation concerning … excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment of the internal market and to avoid distortion of competition”. It remains to be seen whether the EU would indeed assume a central role in the development of an effective prevention policy for nutrition and obesity via a harmonised approach to HFSS taxes. Moreover, the requirement of unanimity required by Article 113 of the TFEU for the adoption of a measure harmonising taxation might represent a significant obstacle.

Industry calls for softer measures

The Italian farmers’ organisation Coldiretti reportedly stated that there would “be strong opposition, especially from the South of Europe” against such a tax and that “of course obesity is a problem, but taxing unhealthy food will just push people to consume even cheaper products of lower quality”. Instead, Coldiretti called for alternative measures, such as food education in schools and stricter marketing limits for ultra-processed products, targeting vulnerable consumers. UNESDA, representing the European soft drinks industry, points out that “no studies have provided clear, consistent evidence on the effectiveness of those taxes in reducing sugar intake or positively impacting health outcomes”.

Public health initiatives, such as bans or restrictions on junk food advertising aimed at children, could indeed be a tool to address obesity. Advertising restrictions are addressed in Directive (EU) 2018/1808 of the European Parliament and of the Council amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services in view of changing market realities (Audiovisual Media Services Directive, hereinafter, AVMSD). While the proposal for an AVMSD foresaw provisions on restrictions of advertisements for HFSS foods and on related nutrient profiles for such foods (see Trade Perspectives, Issue No. 11 of 2 June 2017), under the AVMSD as actually adopted, EU Member States are merely “encouraged to ensure that self- and co-regulation, including through codes of conduct, is used to effectively reduce the exposure of children to audiovisual commercial communications regarding foods and beverages that are high in salt, sugars, fat, saturated fats or trans-fatty acids or that otherwise do not fit those national or international nutritional guidelines”.

In Belgium, from 1 January 2026, under a voluntary code introduced by industry organisations, food companies will refrain from advertising HFSS foods aimed at children under 16. The industry’s internal watchdog, the Jury for Ethical Practices (JEP), will oversee compliance. The Code extends existing restrictions, which currently apply only to children under 13.

Outlook

The Commission has announced that it would use the findings of the recent study to continue the dialogue with EU Member States and engage with a wider group of stakeholders to encourage the exchange of information and best practices. Operators should be prepared to participate in shaping potentially upcoming EU legislation by interacting with EU Institutions, Governments, relevant trade associations, and other affected stakeholders.

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

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Imelda Jo Anastasya, Amanda Carlota, Ignacio Carreño García, Pattranit Chantaplaboon, Joanna Christy, Tobias Dolle, Alya Mahira, Stella Nalwoga, and Paolo R. Vergano contributed to this issue.





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