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23 March 2026

The EU’s Industrial Accelerator Act: Towards EU origin requirements in strategic sectors with significant implications for trade and supply chains?

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

On 4 March 2026, the European Commission (hereinafter, Commission) presented its Proposal for a Regulation on establishing a framework of measures for accelerating industrial capacity and decarbonisation in strategic sectors(hereinafter, Industrial Accelerator Act), which aims at “improving the functioning of the internal market by establishing a framework to support the development, competitiveness and resilience of the Union’s manufacturing sector, with a focus on selected strategic sectors”, in order to contribute to the EU’s “climate objective, economic security and the creation, retention of, and transition into high-quality jobs”. Among other things, the Industrial Accelerator Act would establish a framework for the application of EU origin and low-carbon requirements for certain products and services, within strategic sectors, in the context of public procurement and public support schemes. Such approach, also seen critically within the Commission and among certain EU Member States, is poised to have significant implications for business sourcing or producing outside of the EU.

This article provides an overview of the proposed Industrial Accelerator Act, focusing on the proposed EU origin criteria and the implications for businesses and EU trading partners.

Revitalising the EU’s declining manufacturing sector

The Commission frames the Proposal against the backdrop of a declining manufacturing base in the EU, with its share of the EU’s gross domestic product (GDP) having decreased from 17.4% in 2000 to 14.3% in 2024, and the numerous challenges that it is currently facing, including high energy prices, global overcapacities, and costs associated with decarbonisation. The Industrial Accelerator Act, therefore, aims at reversing this trend, and at ensuring that manufacturing represents 20% of the EU’s GDP by 2035.

This overarching objective would be effectuated by, inter alia, creating demand for EU origin industrial products through EU public procurement and public support schemes. Given that public procurement amounts to around 15% of the EU’s GDP, the Commission views it as a key lever to “foster economic security and resilience of supply chains”, notably by stimulating demand in strategic products and technologies. 

The proposed EU origin requirements

The Commission’s Proposal foresees the introduction of quantitative EU origin thresholds for concrete, mortar, and aluminium used in specific downstream sectors, namely “buildings, infrastructure and transport”, from 1 January 2029, as well as EU origin requirements for electric vehicles, which would apply at a date still to be determined. According to Recital 23 of the proposed Regulation, those requirements would apply to “public supply contracts and in public works, public services contracts and concessions, where those products will be used for activities conducted under those contracts”. The measures would operate as local content requirements (hereinafter, LCRs), conditioning access to certain public procurement contracts, and/or to subsidies or other advantages, to be conferred by EU Member States on meeting minimum thresholds of EU origin materials. 

Article 11 of the proposed Industrial Accelerator Act would require contracting authorities to apply the thresholds laid out in its Annexes II and III in their public procurement procedures. For example, contracting authorities would need to ensure that “aluminium, and any product the performance of which depends mainly on aluminium” has “at least 25% of the total volume of aluminium used” from EU origin. With respect to “Public procurement procedures of electric vehicles”, EU originating status would be obtained by, inter alia, assembling the vehicle in the EU or ensuring a “ratio of at least 70% between the total ex-works price of vehicle components (excluding the vehicle battery) originating in the EU and the total ex-works price of all components (excluding the battery)”. Article 12 of the proposed Industrial Accelerator Actwould require EU Member States to design and implement public support schemes intended to contribute to the objective of strengthening the EU’s “strategic industrial value chains” through EU origin requirements for the covered products. The thresholds set out in Annexes II and III would be applied with respect to the eligibility for the public support schemes.

EU origin is defined in Article 7 of the proposed Industrial Accelerator Act by reference to the Union Customs Code and its non-preferential rules of origin (i.e., specific rules delineating the “economic nationality” of goods not subject to preferential treatment), meaning that origin would be determined based on where goods were produced, manufactured, or substantially transformed.

Consideration of EU commitments in international agreements

The Proposal attempts to reconcile EU origin requirements with the EU’s international obligations by introducing an “equivalence” mechanism. Pursuant to Articles 8(1) and 9(1) of the proposed Industrial Accelerator Act, content originating in third countries that are parties to EU preferential trade agreements (hereinafter, PTAs) or to the World Trade Organization (hereinafter, WTO) Agreement on Government Procurement (hereinafter, GPA) and where the EU has undertaken commitments under those agreements to grant access to its public procurement market for the products covered by the proposed Industrial Accelerator Act, shall, in principle, be treated as equivalent to EU origin. In practice, businesses sourcing content from EU PTA partners would need to meet the preferential rules of origin set out in the respective PTA. However, a third country may be excluded from the scope of application of these provisions based on any of the following criteria: “(a) that third country has failed to provide national treatment related to Union products or entities; (b) such exclusion is justified to avoid dependencies or any other developments that may threaten the security of supply in the Union of the products in question; (c) such exclusion is justified under any other exception under the applicable agreement”. As a result, eligibility for “equivalence” could hinge on the Commission’s assessment of countries’ reciprocal treatment of EU products or entities, supply chain reliability, and broader economic security considerations.

Consistent with WTO rules? 

In general terms, LCRs imposed in the context of procurement intended for public purposes could be challenged as a violation of the national treatment obligation under Article IV of the GPA, which requires the signatories, including the EU and its Member States, to provide goods, services, and suppliers from other GPA Parties treatment no less favourable than that accorded to domestic counterparts. The same obligation would apply to advantages conferred by governments to private entities conditioned on the use of local inputs vis-à-vis foreign inputs under Article III:4 of the WTO General Agreement on Tariffs and Trade 1994 and Article 2 of the WTO Agreement on Trade-Related Investment Measures. While the proposed “equivalence” mechanism foresees extending favourable treatment to products from GPA Parties, the exclusion of certain countries and the related apparent discretion of the Commission might limit effective compliance with the GPA national treatment obligations.

Financial incentives granted to private entities, which are “contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods”, could also be considered as prohibited subsidies under Article 3.1(b) of the WTO Agreement on Subsidies and Countervailing Measures. These considerations underscore the legal complexity and potential risk of legal challenges that the EU could face under both multilateral and bilateral trade commitments, depending on how the EU Member States would ultimately design and implement the public support schemes foreseen in Article 12 of the proposed Industrial Accelerator Act.

Implications for global supply chains

The proposed Industrial Accelerator Act would represent a significant evolution in the EU’s approach to industrial policy, by setting EU origin requirements in public procurement and public support schemes. The introduction of such origin requirements raises complex legal and commercial questions, particularly in light of the EU’s WTO and bilateral commitments. Notably, the broad discretion afforded to the Commission to exclude third countries would add a layer of uncertainty for businesses seeking to access the EU public procurement market.

The Proposal will now be considered by the European Parliament and the Council of the EU before inter-institutional trilogue negotiations are launched. Reactions by EU Member States have so far been diverse, with some, notably France, already proposing to expand the scope, while others, including Germany, having warned about its protectionist approach. These divisions reflect broader tensions between the EU’s objective of strengthening its manufacturing base and the need to preserve open trade.

The next phase of the legislative process is crucial for interested stakeholders, who should actively engage with policymakers to ensure that policies and market access conditions are structured in a legally sound and commercially viable manner.

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

Regulating Halal: Indonesia’s Circular Letter on registering foreign Halal certificates for unlisted products and special treatment for the US

By Alya Mahira, Imelda Jo Anastasya, and Paolo R. Vergano

Indonesia is gradually implementing mandatory Halal certification for a wide range of products over an eight-year period from 2026 to 2034. From 17 October 2026, the certification obligation will apply with respect to food and beverages, food additives, cosmetics, and natural medicines. On 20 February 2026, Indonesia’s Halal Product Assurance Agency (i.e., Badan Penyelenggara Jaminan Produk Halal, hereinafter, BPJPH) issued Circular Letter No. 2 of 2026 (hereinafter, Circular Letter), which provides guidance on the registration of foreign Halal certificates for products “not explicitly listed” under the product categories referenced in Minister of Religious Affairs Decree No. 748 of 2021 on Product Categories Required to Have Halal Certification (hereinafter, MoRA Decree). In another development related to the Halal certification requirement, on 19 February 2026, Indonesia and the US signed the US-Indonesia Agreement on Reciprocal Trade(hereinafter, ART), under which Indonesia agreed to exempt certain US products from its mandatory Halal certification requirements. 

This article provides an overview of the Circular Letter, assesses the exemption granted to certain US products in light of the World Trade Organization (hereinafter, WTO) rules, and considers the implications for businesses and trading partners.

Indonesia’s legal framework for Halal certification

Government Regulation No. 42 of 2024 on Implementation in the Field of Halal Product Assurance (hereinafter, GR 42/2024) requires products listed in the MoRA Decree, which enter, circulate, or are traded in Indonesia, to be certified and labelled as Halal (i.e., “permissible” or “lawful” under Islamic law). The only exemption applies to products categorised as haram (i.e., “forbidden” under Islamic law), such as pork and alcohol, which may be marketed in Indonesia only if they bear a Non-Halal Statement expressly indicating that they do not meet Halal standards (see Trade Perspectives, Issue No. 5 of 9 March 2026).

Foreign Halal products may obtain Halal certification either by applying directly to the BPJPH or through a foreign Halal certification body, provided that a mutual recognition agreement (hereinafter, MRA) has been concluded between the foreign Halal certification body and the BPJPH (see Trade Perspectives, Issue No. 20 of 3 November 2025). So far, more than 100 foreign Halal certification bodies have concluded MRAs with the BPJPH, including bodies from China, from certain EU Member States, and from the US. 

Filling the gaps on Halal certification and registration: The Circular Letter 

Foreign Halal certificates issued by foreign Halal certification bodies recognised by the BPJPH under MRAs must still be registered on Indonesia’s official SiHalal website. In accordance with the applicable rules, an application to register a foreign Halal certificate must specify the relevant product category. The MoRA Decree provides a list of broad product categories requiring Halal certification, indicating the more detailed types of products under each category. For example, under the category of fats, oils, and oil emulsions, the products include ghee, virgin oil, and vegetable oils. The Circular Letter recognises that “developments in global product innovation” may give rise to new derivatives that are not listed within the existing categories in the MoRA Decree and, accordingly, provides guidance on the registration of foreign Halal certificates for such ‘novel’ products.

For products that are not listed in the categories under the MoRA Decree, importers must provide the following information to the BPJPH: 1) A Statement Letter, which explains, inter alia, the product’s ingredients and production process; 2) A completed Material Safety Data Sheet, which provides information on a product’s hazards and safe handling, storage, and use; 3) A Certificate of Analysis, which confirms that a specific batch of the product meets the required chemical and physical specifications; and/or 4) Other documents supporting the composition of the ingredients. The Head of the BPJPH will then determine the appropriate product classification within the applicable category and include a reference to it in the MoRA Decree. Once this classification is established, the foreign Halal certificate may be registered with the BPJPH, allowing the product to be marketed in Indonesia on the basis of the foreign certification.

Although businesses registering foreign Halal certificates must prepare additional supporting documents, this requirement appears reasonable, as it applies only to ‘novel’ products and is required only once. Thereafter, businesses registering foreign Halal certificates for the same products would follow the regular registration procedure.

Halal certification exemptions under the US-Indonesia ART: An unfair advantage?

On 19 February 2026, in response to the US’ imposition of additional ‘reciprocal’ tariffs on Indonesia (see TradePerspectives, Issue No. 15 of 2025), the two countries signed the ART, under which the US agreed to exempt certain Indonesian agricultural and industrial products from its 19% ‘reciprocal’ tariff that applied prior to the US Supreme Court’s ruling on the additional tariffs adopted on the basis of the US’ International Emergency Economic Powers Act(IEEPA), while Indonesia agreed to remove certain non-tariff barriers, including those related to Halal certification.

Article 2.9 of Annex III to the ART provides that Indonesia shall exempt certain US products, such as cosmetics and medical devices, as well as containers and transport materials, except those used for food and beverages, cosmetics, and pharmaceuticals, from its Halal certification and labelling requirements. For products that remain subject to Halal certification requirements, Indonesia allows BPJPH-recognised US Halal certification bodies to certify any product for importation into Indonesia without “additional requirements or restrictions”, going beyond Indonesia’s existing MRAs with other foreign Halal certification bodies, which are typically limited to certain product categories. For example, MRAs concluded with Belgian Halal certification bodies only cover food and beverages. Indonesia also committed to streamline and expedite the recognition process for US Halal certification bodies. 

These commitments may raise concerns under Article I:1 of the General Agreement on Tariffs and Trade 1994(hereinafter, GATT 1994), as they confer certain ‘advantages’ solely on US products, which are not extended ‘immediately’ and ‘unconditionally’ to ‘like’ products from other WTO Members. The US and Indonesia could argue that the ART falls under Article XXIV of the GATT 1994, which allows WTO Members to depart from Article I:1 in the context of preferential trade agreements that eliminate “duties and other restrictive regulations of commerce” on “substantially all the trade” between the parties. There is no official WTO interpretation of “substantially all trade”, but it is generally considered as the liberalisation of at least 90% of the total value of trade among the parties.

In this context, the ART reveals significant liberalisation asymmetries. It is a sector-specific arrangement rather than a comprehensive preferential trade agreement under which Indonesia undertakes tariff elimination on over 99% of US products and selectively removes or addresses certain non-tariff measures (e.g., Halal requirements and local content measures), whereas the US merely eliminates an already arguably WTO-inconsistent unilateral additional tariff of 19% on a limited set of Indonesian products. The ART, therefore, falls short of eliminating duties and other restrictive regulations on “substantially all the trade” and the preferential Halal-related treatment would likely be found to be inconsistent with Article I:1 of the GATT 1994.

To ensure consistency with WTO rules, Indonesia could consider extending the same Halal exemptions under the ART to other WTO Members. In the alternative, Indonesia could provide a more trade-facilitative approach to all trading partners, notably by recognising Halal certifications issued in other countries as also meeting its domestic Halal requirements.Rather than limiting MRAs to those concluded by BPJPH with selected foreign Halal certification bodies, Indonesia could also pursue broader mutual recognition at the intergovernmental level, including in the context of preferential trade agreements.

Notably, under the EU-Indonesia Comprehensive Economic Partnership Agreement, both sides have agreed to enhance cooperation on Halal matters, including by exploring the possibility of recognising the EU as a single entity for Halal certification purposes. This follows a request from the EU, made during a meeting of the WTO Committee on Technical Barriers to Trade in November 2025, for Indonesia to recognise the EU’s Single Market, in which the EU functions as a single, integrated economic area, governed by a set of uniform rules.

Ensuring compliance and fair facilitation 

The Circular Letter aims at facilitating the registration of foreign Halal certificates for ‘novel’ products by requiring businesses to provide additional supporting documents. Businesses, including those dealing with food and beverages, cosmetics, and natural medicines, should pay close attention to Indonesia’s mandatory Halal certification deadline of 17 October 2026, as non-compliance would prevent such products from being marketed in Indonesia. While the negotiation of facilitative approaches with trading partners can be welcomed, WTO consistency must be ensured to avoid discriminatory treatment. 

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

Challenging compliance: New EU maximum residue levels for two pesticides that are harmful to bees take effect

By Amanda Carlota, Ignacio Carreño García, and Tobias Dolle

On 7 March 2026, Commission Regulation (EU) 2023/334 of 2 February 2023 amending Annexes II and V to Regulation (EC) No 396/2005 of the European Parliament and of the  Council as regards maximum residue levels for clothianidin and thiamethoxam in or on certain products came into effect, setting new maximum residue levels (MRLs) for the pesticides clothianidin and thiamethoxam in food and feed of plant and animal origin.

This article examines the European Commission’s (hereinafter, Commission) rationale for imposing restrictions on the use of clothianidin and thiamethoxam, discusses how the transitional period and import tolerances are meant to help operators and to facilitate trade, and assesses whether additional support measures are needed. 

The EU restricts the use of clothianidin and thiamethoxam to protect bees

Clothianidin and thiamethoxam are classified as neonicotinoids, which are active substances used in plant protection products to control harmful insects. Neonicotinoids are considered ‘systemic’ pesticides, which means that they do not remain on the surface of the treated parts of the plant, but permeate the entire plant, including the pollen and nectar. They are particularly hazardous for insects, affecting their central nervous system, leading to paralysis and death. 

Clothianidin and thiamethoxam had received EU approval for use in plant protection products in 2006 and 2007, respectively. However, in 2013, the European Food Safety Authority (hereinafter, EFSA) identified “high acute risks” for bees from exposure to, and consumption of, certain crops that had been treated with either clothianidin or thiamethoxam. Consequently, the Commission restricted the use of both pesticides to “professional uses as insecticide” to minimise the exposure of bees. In 2018, following the EFSA’s confirmation that most uses of clothianidin and thiamethoxam posed a risk to wild bees and honeybees, the Commission adopted Commission Implementing Regulation (EU) 2018/784 and Commission Implementing Regulation (EU) 2018/785, banning all outdoor uses of the two pesticides and allowing their use only within permanent greenhouses. 

World Trade Organization Members question the EU’s environmental justification

In 2022, the EU notified the World Trade Organization’s (hereinafter, WTO) Committee on Technical Barriers to Trade (hereinafter, TBT) of its intention to lower the MRLs applied to imported food to the Limit of Determination (LOD), which refers to the “validated lowest residue concentration which can be quantified and reported by routine monitoring with validated control methods”, for both pesticides.

The notification states that, “given the global nature of pollinator decline”, there was a need to ensure that also commodities imported into the EU “do not contain residues resulting from good agricultural practices based on outdoor uses of clothianidin and/or thiamethoxam, in order to avoid the transfer of adverse effects on bees from food production in the European Union to production of food in other parts of the world that is then imported into the European Union”.

During the TBT Committee’s meeting in July 2022, several WTO Members voiced concerns about the EU’s justification of the measure on environmental grounds, with Colombia referring to an “extraterritorial application” of the EU’s standards and Australia noting that the EU assumed it was “better placed to assess the environmental impacts of active substances in third countries than the chemical regulators of those countries”.

Maximum residue levels set at the Limit of Determination

Despite the criticism voiced by trading partners in the TBT Committee, the EU adopted the Regulation, lowering the MRLs for clothianidin and thiamethoxam to the LOD. Recital 10 of Commission Regulation (EU) 2023/334 cites “growing worldwide concern” that the decline of pollinators, such as bees, represents a “serious threat to global biodiversity, the environment and sustainable development, as well as to maintaining agricultural productivity and food security”.

The Annex to Commission Regulation (EU) 2023/334 lists the modified MRLs for clothianidin and thiamethoxam for different food and feed products. For example, all imported fruits (both fresh and frozen) and tree nuts (e.g., pistachios and almonds) are now subject to MRLs of 0,01 mg/kg for both clothianidin and thiamethoxam, while teas and coffee beans are now subject to MRLs of 0,05 mg/kg for both pesticides.

Reducing the burden through a transitional period and import?

Commission Regulation (EU) 2023/334 was published in the Official Journal of the EU on 15 February 2023, entered into force on 7 March 2023, but only applies since 7 March 2026. This three-year transitional period was intended to give operators in third countries, especially those in least developed and developing countries, and food business operators in the EU, sufficient time to comply with the new MRLs by, inter alia, adapting their agricultural practices, which, according to Recital 19, could be “reasonably expected to be achieved after at least two growing seasons”. 

In order to “meet the needs of international trade”, Commission Regulation (EU) 2023/334 also recalls that operators may apply for import tolerances of clothianidin and thiamethoxam on the basis of Regulation (EC) No 396/2005. Applicants must submit scientific evidence demonstrating that the Good Agricultural Practices (GAPs), defined in that Regulation as the “nationally recommended, authorised or registered safe use of plant protection products under actual conditions at any stage”, applying for the specific uses of clothianidin or thiamethoxam, “does not adversely impact pollinators”. The Commission would assess any application for an import tolerance on a case-by-case basis. 

More restrictions on the horizon?

Recital 16 of Commission Regulation (EU) 2023/334 states that the EU’s fellow WTO Members had been “consulted” on the new MRLs and that their comments had been “taken into account”. However, many WTO Members remain critical and have continued to criticise the new rules. Most recently, during a meeting of the Council for Trade in Goods held in April 2025, WTO Members discussed Commission Regulation (EU) 2023/334 and the US described it as an “unsubstantiated use of a food safety metric to achieve supposed environmental aims” and Australia argued that lowering the MRLs for clothianidin and thiamethoxam to the LOD would constitute a “de facto ban on the usage of those products in trading partners should they wish to export to the EU”.

Still, more restrictions appear to be imminent. On 16 December 2025, the Commission presented its Food and Feed Safety Simplification Package, which includes a proposal for stronger import rules for pesticide residues. The European Commissioner for Agriculture and Food, Christophe Hansen, stated that food imports that had been “treated with the most hazardous pesticides banned in the EU” would “not be allowed” into the EU. 

It should also be noted that, in addition to clothianidin and thiamethoxam, the Commission has also restricted the use of two other previously approved neonicotinoids, namely imidacloprid, which is currently limited to indoor greenhouse use, and thiacloprid, whose approval was not renewed in 2020. A fifth pesticide, acetamiprid, remains the only neonicotinoid authorised for use without restrictions. After the EFSA had concluded that it posed only a low risk to bees, its approval was renewed in 2018 until 2033.

Agri-food operators struggle with phasing out neonicotinoids

Despite the transitional period and the availability of import tolerances, reports indicate that agri-food operators around the world are facing difficulties in phasing out their use of neonicotinoids. In the EU, this is demonstrated by the number of emergency authorisations for neonicotinoids issued by EU Member States over the past year.

Businesses that use neonicotinoids are advised to carefully review their agricultural practices and explore the use of alternative pesticides for their crops and to raise the issue with their Governments to inform further discussions at the WTO.

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

Recently adopted EU legislation

Trade Remedies

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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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